VIEW FROM VEDOMOSTI:'Taxman' Putin Lifts a Few Lines From Beatles' Songs
- By Leonid Bershidsky
- Jan. 18 2000 00:00
In 1966, George Harrison wrote a song about taxes. He called it "Taxman." It contains immortal lines like "Now my advice for those who die: Declare the pennies on your eyes." The chorus made a specific reference to two British prime ministers of the Beatlemania era: Harold Wilson and Edward Heath.
"Taxman, Mr. Wilson, taxman, Mr. Heath," the Liverpool Four sang in sweet harmony.
Because the song was such a timeless hit, Harrison continued playing it in concerts long after the Beatles broke up. In the early '90s few people remembered who Wilson and Heath were, so Harrison changed the words slightly. "Taxman Boris Yeltsin, taxman Mr. Bush," went the modernized line.
Now Yeltsin is gone, and if Harrison wants to keep updating his masterpiece, he will have to sing about taxman Mr. Putin. And he should.
Putin's record as prime minister was based on tightening the fiscal screws.
In the fall of 1999, it was he who raised oil export duties not once, but twice. He could have created a more favorable tax environment for investment projects so companies could plow their windfall profits from the high price of oil into the Russian economy. He chose instead to raise the tax burden.
Putin was also responsible for hikes in export duties on scrap metal and the introduction of export duties on gas. Import duties went up on a whole range of goods despite the protectionist bonus companies received from the ruble devaluation and have not yet fully lost.
It was Putin who rammed through the cancellation of tolling, a practice whereby Russian companies, especially in the aluminum business, processed raw materials for outside companies, mostly incorporated in tax havens, which then resold the finished product for a profit. The abolition of tolling was largely a progressive move, and it should help the Russian budget because factories will have to pay taxes on the sale of their products.
But with the exception of one large company, Sibirsky Aluminum, most other Russian producers of the light metal used the practice, and now, Novokuznetsk Aluminum, one of the largest factories in the nation, is about to stop production for a while so it can find new suppliers and buyers.
Finally, it was Putin who got the old State Duma to change its uncompromising stance against hikes in excise taxes that went into effect Jan. 1. Putin compromised and raised the excise taxes 25 to 40 percent rather than 100 percent. But even so, Russia's booming beer industry has been sending disaster signals and predicting a fall in output.
Industrial lobbyists, of course, always scream when taxes are raised, and in the end nothing too apocalyptic may happen. But the pattern is there.
Putin wants to tax Russian business to the hilt. That, of course, is what the International Monetary Fund has always pushed the government to do, but at least the IMF had the right to do it: Russia owed it serious money. No one in Russia owes anything to Putin, unless you count the military industrial complex, the military itself and the recipients of government wages and pensions (of these there are 7 million, but they are all voters - after all).
As Harrison sang on the Revolver album, "Don't ask me what I want it for if you don't want to pay some more." We don't have to ask, though. There is the Chechen campaign, and it will be as hard to find out how much it costs as to make certain of the true number of casualties. And, of course, there is the upcoming election, which Putin wants to win in the first round. That means giving a lot of money to regional governors who cannot pay doctors and teachers.
After the election, Putin will want the money back from these governors.
But, as former deputy Central Bank chief Sergei Alexashenko recently noted, citing the IMF's record in Russia, "You can force people to meet your conditions before you give them money, not after."
What Putin is doing is certainly good for his election prospects and it might even be good for the country. After all, no self-respecting nation is as tolerant toward tax evasion as Russia has been in recent years. But Russian business already groans under its enormous tax burden. The Russian economy cannot grow the way Putin wants it to if every time the market is nice to a certain sector, new taxes are slapped on it.
So far, Putin has not spoken in favor of a comprehensive tax reform that would simplify taxation and in the end reduce, not increase, the fiscal pressure on companies. That might be because he has other priorities now.
But then there is nothing to prevent him from having other priorities later as well.
After the election, he may decide to live by another Harrison line, the last one in the song: "And you're working for no one but me."