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. Last Updated: 07/27/2016

Tax Powers Extended To Interior Ministry

President Boris Yeltsin has signed a decree giving broad new powers to the state police to scout out tax cheats and keep part of the proceeds, in a move that observers say could cast a further chill on an already unfriendly business climate.

The new decree was signed Saturday, according to Alexei Petrenko, head of the press center of the Interior Ministry's information department, but has not yet been published.

It allows Interior Ministry, or MVD, officers to participate jointly with the federal tax organs in the collection of taxes, and tasks the police with protecting employees of the tax service who are carrying out inspections.

Local governments now "have the right" to give local MVD departments part of the fines collected from retail traders who violate tax laws.

The Interior Ministry's new tasks would appear to duplicate those of the federal tax police service, an armed force set up in 1992 to assist the state tax service.

Last May, Yeltsin decreed that the state tax service and the tax police could keep half of the sums gathered from fines imposed on tax violators.

Petrenko would not say what portion of the fines will go to the MVD under the new decree.

According to Petrenko, the decree means that the ministry's anti-economic crime department, which "constantly" encounters violations of tax law in the course of its work, will no longer have to transfer tax violation cases to the tax police.

No one at the state tax service or the federal tax police service could be reached for comment, while a spokesman for the Moscow branch of the tax police refused to comment, saying he had not yet seen a copy of the order.

Andrei Piontkowsky, of the Moscow-based Center for Strategic Studies, said the idea of letting the police get part of the penalties imposed on tax offenders revived an old Russian practice.

"The same rights were given to Ivan the Terrible's oprichnina: they could privatize one-third of the property of the people they arrested," he said, speaking of the notorious death squads of the 16th-century tsar. "Now the same right is given to the police.

"In practical terms, it will mean legal racketeering against kiosks and small shops, because everybody in this country has problems with tax payments, since legislation is cloudy ... Such moves transform the state authority into private gangs, motivated by their private interests."

A representative of Russia's business community said Tuesday he was not happy about the new decree.

"The question of taxes -- this is for the tax inspectorate. Therefore, of course, when the MVD interferes ... we must understand what kinds of threats exist to our lives as businessmen," said Igor Bogdanov, vice president of the Association of Russian Banks.

The decree, he said, will worsen Russia's "moral climate."

"For businessmen to work peacefully a certain atmosphere has to be created in which one wants to work and earn money. Russia's big tragedy is that such a climate has not been created."

Yury Shchekochikin, a member of the State Duma's security committee and deputy chief editor of the weekly Novaya Gazeta, said he was "categorically against" the decree.

"While the police can't deal with ordinary crime, they want to take one more thing upon themselves, but one that is lucrative," he said.

Novaya Gazeta reported Monday that Interior Minister Anatoly Kulikov and Vitaly Artyukhov, head of Russia's tax service, issued a joint secret order last month allowing policemen to work jointly with the tax organs in enforcing tax laws. This order permitted MVD officers to inspect markets and other retail outlets, as well as retailers' financial records.

The secret order, said the MVD's Petrenko, "actually exists, but not with such stupidity as it is presented in Novaya Gazeta."

Piontkowsky's interpretation is that the presidential decree allowing police participation in tax-gathering was issued once it became known that Novaya Gazeta was about to publish an article on the secret joint MVD-tax service order.

"I think it's to some degree a reaction to this Novaya Gazeta article, because the newspaper demonstrated convincingly that this secret order is unconstitutional," he said. "They are repairing their mistake by presenting the same unconstitutional measure in a more formal way."