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. Last Updated: 07/27/2016

The Last Straw: Investors Sing The Tax Blues

I came across this letter and thought I would share it with you. "Dear Viktor Chernomyrdin, Allow me to introduce myself. I am vice president of Russian operations for the ABV widget company. But most important for the purposes of this letter, you should know right off that I am a capitalist. I have come to Russia at great financial risk in the hope of making money. It is the only reason I am here. While I may have developed feelings for this country, for the trials you are facing and those you undoubtedly have yet to face, I will leave the moment a realistic chance of making money here vanishes. With the blizzard of new taxes swirling about me, those chances are starting to look pretty vaporous. And here is what I am wondering: Do you care? This is why I am writing to you today. I have this feeling that a terrible mistake is being made. Last year I convinced my board of directors to invest $1 million in a Russian widget plant. They thought I was crazy. 'Go to China,' they said. 'Go to Malaysia. Go to Mexico. But stay away from Russia, it's trouble.' Oh, Viktor Stepanovich, you should have heard me then. You would have been impressed. I stood before those small-minded doubters and preached to them about the huge untapped Russian market, its highly educated inexpensive labor force, its commitment to market economics, its abundance of natural resources, the opportunities for military conversion projects and the country's world-class expertise in specialized fields. So I came here. I packed a few of our possessions onto a moving van and put my family on a plane. But when the moving van arrived at customs, you collected a 63 percent belongings tax on my goods. Welcome to Russia. Then things went from bad to worse. I had to advise my company against transferring credits to our Russian widget plant because your tax collectors are trying to collect a 23 percent value-added tax on this money. How can I hope to turn a profit when 23 percent of my capital is taken away before I even start? Then last week, with a stroke of your pen, you lifted my exemption on the excess wages tax. In this one terrible instant, you increased my payroll burden by 38 percent. So much for your cheap labor force. Business people such as myself, faced with the power of governments to tax us out of existence, comfort ourselves with the idea that countries want their businesses to make a profit because, after all, they collect taxes on profits. But how clever you are! You don't tax my profits; you tax my turnover, my payroll, my property and my investment capital. How convenient for you; it doesn't matter to you one way or another if I make a profit. But I will go one step further, Mr. Chernomyrdin. I could bear all of these taxes and build them into my tax plan, if they would just stay the same from one day to the next. Lately I look like a fool before those smug board members who told me to take my widget plant and my $1 million to Mexico. If things don't change, I just may have to take my plans elsewhere. Do you know where I can take some Spanish lessons?"