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. Last Updated: 07/27/2016

Ex-Ambassador Castigates Tax System

If money is the root of all evil, then taxes take second place as the source of many of Russia's most resilient problems. That's the view of the former U.S. ambassador to the Soviet Union, Jack Matlock, who said in an interview Friday that Russia's "crazy" tax system has spawned corruption and crime rather than income for the government. "They've created a system which, number one, tends to stifle entrepreneurship and building business in real market conditions, and, number two, breeds corruption because in order to survive businessmen have to underpay their taxes," he said. "This gives both bureaucrats and organized crime a place to step in." Many foreign businesses and officials have criticized Russia's labyrinth of onerous taxes, but Matlock was unusually direct in connecting taxes with the growing disease of crime and corruption. "They have a tax structure now that really gives them the worst of every world no matter how you look at it: less revenue, more crime, bad statistics, less incentive," said Matlock, who served as U.S. ambassador here from 1987 to 1991. "Just arithmetically there is no way to break even if you pay all those taxes." An official in the Finance Ministry reached Friday said that he agreed with much of Matlock's assessment. "Taxes here are really complex and difficult to calculate," said Alexander Kosolabov, deputy director of the tax reform department. "Difficulties in counting the taxes due and filling out all the forms, as well as lack of money to pay the taxes, does lead to corruption." He said his division is preparing new rules to simplify the tax system in the future. Matlock said that if such a simpler code were to evolve, Russia would attract more foreign investment, keep many Russians from diverting their income abroad, and even bring in more funds to government coffers."If they had a simpler policy of lower rates, but most of all simpler, they would actually collect more money," said Matlock, who is now a professor of diplomacy at Columbia University in New York. The former diplomat also criticized the U.S. aid program to Russia for bringing too many overpaid, under-qualified advisers over to Russia at U.S. taxpayers' expense. "I'm dubious about sending large numbers of Americans here supposedly to help when they don't know the country and they don't know the language; I think ultimately it does more harm than good," he said. "On the whole, I think that effort should be phased out or cut back." He said he favored bringing over Russians to the U.S. as a better form of professional training. But Jim Norris, the director of the Moscow U.S.A.I.D. office, which administers the State Department's assistance to Russia, defended his agency, saying that the great majority of the advisers here have relevant, useful experience that can help large numbers of Russians. "I think Ambassador Matlock is speaking from a theoretical perception rather than any real knowledge of what is going on here," Norris said. "What Russia needs from the United State at this stage of the process is knowledge."