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. Last Updated: 07/27/2016

Proposed Cash Tax

In a statement reflective of the poor state of Russian tax collection, Prime Minister Viktor Chernomyrdin told a session of the State Tax Service that the government may impose duties on all cash imports coming into Russia in order to boost budget revenues. And while the prime minister did not say when such a tax could be introduced, its mere suggestion caused repercussions in the country's banking system.

The feasibility of implementing a cash tax to replenish state coffers was first discussed at a session of the governmental commission on day-to-day operations. Members of the Central Bank and State Customs Committee were charged with working out a proposal on the matter. The dire situation with budget revenues was given as the reason for the initiative.

According to the State Customs Committee, the amount of foreign currency imported annually by banks runs in the neighborhood of $30 billion. These billions, naturally, became a temptation for the government, which then conceived an idea for taxing that market. ...

The Finance Ministry was asked to write a decree outlining the size of the duties to be imposed. The Finance Ministry, however, handed the task over to the Economics Ministry, the result of which is that the drafted document would be not a decree, but a federal law.

It is worth mentioning, however, that not all government bodies supported the draft. ... The Central Bank, for example, opposed it because of what it called contradictions to current legislation. Russian law currently contains no restrictions on imports of cash into the country.