ESSAY: Tax Collectors See Extortion as Part of the Job

Our rattling Moskvich was cutting across the empty fields of Kursk gubernia, dipping from time to time into clear groves. We were several kilometers away from the Pristen city center when the driver nodded in the direction of a wooded ravine built up with mansions constructed from silicone bricks.

"Here is our main local attraction - The Valley of the Destitute," the driver said.

Our car belonged to the prosecutor's office in the neighboring region, where I was on a business trip. The driver, of course, knew everything about local life.

"You see that two-story cottage with the iron roof?" he asked. "It was built for the head of the local tax inspectorate, apparently with public funds. But the house is her property."

We drove closer along the crunchy gravel.

"She herself is now in prison, and they're supposed to confiscate the house," he added.

The mansion was luxurious, with a spacious garage, on whose metal gates was written in chalk: "The Nikitins." We were getting ready to leave when a Zhiguli pulled up. Out came a lean, thirtysomething man, who looked at us warily and introduced himself. He turned out to be the son of the jailed tax chief. Next out of the car came a woman with a three-year-old child. She smiled politely and invited us in for tea. But we were in a hurry.

"They live in Moscow," the driver explained as we turned onto the highway. "They spend the summers here. They're rich! The son also has a privatized apartment in Pristen, which he rents out."

The next day, in Kursk, at the oblast prosecutor's offices, I took a look at the material from the Nikitina criminal case. It turns out that she, as head of the Pristen state tax inspectorate, made a decision to improve the housing conditions of her employees, eight of whom were still waiting for living quarters. She decided to build housing using money from the tax inspectorate's social development fund. True, the fund was not rich. But there was a well-known method of replenishing it: If tax inspectors find mistakes in the records of the enterprises and shops they are auditing, 10 percent of the penalties levied for those mistakes are legally remitted to the tax inspectorate's social development fund.

The only problem was that experienced accountants began to make fewer mistakes. So Nikitina instructed her employees to get the rough drafts of their records and find the mistakes there. If necessary, enter incorrect figures yourselves, she instructed them, and correct them later. That will replenish the fund. The employees became flustered, thinking: "Falsification!" But Nikitina let it be known in no uncertain terms that whoever refused w ould be fired. Given how difficult it is to find work in a small town, they decided to go along. Nikitina's scheme proved successful - her eight employees got housing. And when they had collected around a half billion rubles, Nikitina, in the name of the tax inspectorate, cut a deal with contracting firms to build a two-story home.

The inspectorate's employees quickly figured out who the lucky beneficiary was - Nikitina herself. They felt not only swindled, but dragged through the mud. With their hands, Nikitina had cheated the state while building herself a royal palace with 160 square meters of floor space. In order to formally have the right to expanded floor space, she had registered her son and daughter-in-law, residents of Moscow, as part of her family. She then privatized the residence.

Nikitina also liked to make the rounds of the shops, particularly those that had been cited for underpaying taxes. The owner of one of these, the Yug shop, had asked Nikitina to lower the shop's tax penalties in exchange for "favors." The penalty was lowered to a symbolic amount. Exactly one day after it was paid, Nikitina arrived at the shop and, without ceremony, asked for her favor. The owner made a grand gesture, saying: "Pick for yourself." Nikitina glanced at the green velour and took two cuts of four meters each. Following that visit, Nikitina frequently returned to the shop. If she needed a suit to be made or a dress for her daughter, it was done - naturally, for free.

Then Nikitina, preparing for a vacation in the United States, panicked: How will she look in front of the American people? So she hurried back to the shop, whose owner went to Moscow and brought her back a jacket and skirt made from stone-washed silk. Nikitina also demanded pocket money for her trip, but the owner, exhausted from the seemingly endless extortion, could only come up with half the sum Nikitina demanded. (To get the rest, Nikitina went to another shop that owed her a favor.)

According to the Yug shop's owner, the sum total of her favors to Nikitina exceeded what she owed the state in taxes and penalties by several times. She cursed the day she had cut a deal with Nikitina. As soon as the story about Nikitina privatizing her mansion came to light - followed by news of the whole chain of bribes she had extracted - the shop owner, along with the other entrepreneurs caught on Nikitina's hook, began to give evidence against her.

If only the Nikitina case had been an exception. In the Ileksk region of Orenburg oblast, businesspeople were similarly fleeced by Maria Proskuryakova, also head of the local tax inspectorate. Only she brought her son, Yevgeny, in on the scheme. He was a specialist on the Ileksk administration's committee for quality and the protection of consumers' rights. The mother-and-son act worked this way: Yevgeny went to businesses to carry out inspections accompanied by his mother's subordinates. Upon uncovering violations, the young Proskuryakov would invite the accused for a face-to-face conversation, during which time he would launch an all-out attack. The merchant would surrender and bring Proskuryakov everything he asked for - food, dishes, money, imported household appliances.

As with Nikitina in Kursk, the Proskuryakovs were blinded by their own greed and impunity. They could not stop, and kept going back to the same shops over and over, extracting nightmarish payments.

Racketeers acting in the name of the tax authorities prey not only on merchants, but on many others, even the heads of factories. Their behavior is not surprising given that the state already grabs 80 kopeks from every ruble, and the tax men already feel themselves accomplices in robbery and thus freed from moral responsibility. What is more, given the insane tax system, practically everyone evades taxes. Thus the state's tax racketeers see almost every Russian as a swindler from whom it is no sin to extort money. Practically all these collisions take place outside the sphere of legality.

Our lawmakers have been battling over a new tax code for more than a year now, while the tax organs transmute into bandit structures, making a living from an open racket.

Igor Gamayunov is a correspondent for Literaturnaya Gazeta. He contributed this essay to The Moscow Times.