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. Last Updated: 07/27/2016

INSIDE RUSSIA: Chaos Reigns In Tax Crisis, Nonpayments




An important event took place in the White House Dec. 21. Minister Without Portfolio Yevgeny Yasin proposed a rather decisive and sound program for fighting the nonpayments crisis. And he was hissed at by the overwhelming majority of members of the commission on economic reform, 90 percent of whom are friends of First Deputy Prime Minister Anatoly Chubais or, in other words, the most liberal people in the Russian bureaucracy.


Yasin proposed canceling the system by which enterprises that owe back taxes are obliged to transfer all revenues to a single arrears account. The enterprises thus cannot pay their suppliers until their debts are covered. Few measures have done as much to create a double accounting system as the single arrears account. Enterprises with arrears conduct their business through subsidiaries. And wages are paid with the interest earned on money that is kept in the bank accounts of these third parties.


He also proposed canceling the most pernicious directive in the history of the Finance Ministry, which penalizes companies that sell their production below cost. The prices for goods that are not paid for up front are always higher than those paid for in cash. If a manager of a machine factory, for example, receives metal by barter and resells it for cash, this is considered selling below cost. Thus, the directive encourages enterprises to continue the barter system or sell their goods through subsidiaries.


Yasin's proposals were not appreciated. The head of the State Tax Service Alexander Pochinok said if selling below cost was allowed, then factories would begin to sell each other Zhiguli automobiles for 5 rubles a piece and would lower the tax base, as was the case in 1992. But, in fact, this occurred because of the above mentioned directive.


Yasin also criticized the recent decree on restructuring and selling off budget debt. He reminded those present that taxes are not used for bargaining in developed countries.


Yasin thus proposed that companies indebted to the state should not be put on a list, nor should state debt be traded freely. He took a rather cautious stance on the state's rights in relation to creditors.


Chubais said at the meeting, "No equality between the state and enterprises can exist. The state is by definition a dull object. If it is forced to compete as equals with refined enterprises, it will undoubtedly lose."


The most amusing skirmish at the White House meeting occurred between Pochinok and the Central Bank first deputy chairman Sergei Alexashenko. Pochinok said Russians are incapable of paying taxes. Alexashenko, a staunch supporter of a strong centralized state, said: "I would ask the head of the State Tax Service not to talk in the presence of the mass media about the intolerable level of taxes. Russian taxes can be paid. It is the Russians who can't pay taxes, but McDonald's and Coca-Cola for some reason work very well and pay taxes."


"They don't pay either," Pochinok responded. "As it turns out, we've just looked into Coca-Cola."


What's most unfortunate about the crisis of low tax collection is the confusion that continues to reign in the government over the battle for taxes and against nonpayments.


Yulia Latynina is a staff writer for Izvestia.