Not Everyone Wants Simpler Tax Collection

Last Thursday, the government considered the draft of an epoch-making document, the tax code, which the Finance Ministry has been working on for years now.


The idea behind the tax code is to put order into the contradictory and often inscrutable tax system in Russia, limit arbitrary rule by officials and decrease the opportunities for legally and illegally evading taxes.


The existing tax system -- if you can call it a system -- is made up of 1,200 poorly coordinated or utterly contradictory presidential decrees, government orders and ministerial instructions. Moreover, there are about another 3,000 legislative and sub-legislative acts that indirectly refer to tax norms.


Thus, the more than 4,000 such acts regulate about 200 various taxes. Even the representatives of the tax service are not always able to figure them all out. As for taxpayers, almost anyone can be accused of violating one of the 4,000 tax documents.


The debt of taxpayers to the budget is steadily growing. Last year, the sum of taxes that was owed was more than twice the 1995 level.


Companies and individuals are not the only tax debtors. Of the 89 subjects of the Russian Federation, only three have fully paid their debt to the federal budget. Furthermore, seven out of the 89 regions provide almost 52 percent of the budget's revenues, with Moscow accounting for 27 percent.


The tax code proposes to simplify the existing system. It would reduce the number of taxes from 200 to 30. The code also is also aimed at making fundamental changes in tax exemptions.


This has led to increased fighting between the Finance Ministry and the ministries and social organizations that still enjoy tax privileges. While working on the new tax code, the Finance Ministry uncovered an astronomical number of tax exemptions acquired at various times by various means. Finance Minister Alexander Livshits and his colleagues were deeply shocked by the level of lost budget revenues because of these exemptions, which are estimated at 162 trillion rubles ($28.6 billion).


The task of taking away exemptions is not a simple one. Try removing the tax privileges from the hundreds of generals and tens of thousands of officers in the Russian army. They are exempt from paying income tax. Are there other countries in the civilized world where generals don't pay income tax? Moreover, this contradicts the constitution, which says paying taxes is the direct responsibility of the citizen. Even stranger is the fact that the tax police itself, which is there to catch tax evaders, is exempt from income tax.


As the Finance Ministry was preparing the tax code, it discovered that it had hardly any allies in the government. Many ministers openly and secretly fight to keep their existing privileges -- and not without some success. The tax code, which the government looked at when it convened Thursday, was not sent to the State Duma, as the Finance Ministry had hoped, but was sent back to be reworked.


The Finance Ministry fears that during the month that has been set aside for completing the tax code, lobbyists will succeed in persuading the government to allow them to hold on to much of their privileges. Compared with what the holders of such privileges stand to lose, dismissing the finance minister, who is doing everything to abolish these exemptions, would be a very small price to pay.





Mikhail Berger is economics editor for Izvestia.