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. Last Updated: 07/27/2016

Government Says ARKO Can Get Taxes Off Banks

The government is still debating whether next year it will allocate budget funding to ARKO, a federal agency charged with reviving the banking system f but in the meantime, ARKO is more than welcome to billions of dollars in tax arrears trapped in the banking system.

Provided, of course, ARKO can figure out a way to get its hands on that money.

That was the message Finance Minister Mikhail Kasyanov offered at a news conference Wednesday.

"If ARKO can manage to get these [tax arrear] funds from the banks when it is restructuring them, it can use that money to support other banks it is working on," Kasyanov suggested.

Officials at ARKO refused to comment Wednesday, saying they wanted to wait until the draft 2000 budget had been forwarded to the State Duma for examination.

But according to the Prime-Tass news agency, ARKO has already requested a more orthodox financing scheme: It has requested further budget funding of 50 billion rubles ($2 billion) for 2000 to help it tackle the enormous task of restructuring the banking sector, the news agency reported Wednesday.

Billions of rubles in tax arrears have mounted up rapidly in insolvent commercial banks over the past several months. Kasyanov said tax payments that are trapped in insolvent banks now total somewhere between 35 billion rubles to 37 billion rubles ($1.4 billion to $1.48 billion).

These debts continue to pile up in what is broadly recognized as a series of collusive schemes between taxpayers and the managers of crippled banks to defraud the government: For a fee, banks process payment orders from taxpayers to the tax authorities f and then plead that the ruble devaluation-led banking crash is a force majeure situation preventing them from carrying out those payment orders.

This is possible thanks to a Constitutional Court ruling last fall that a company is no longer liable for a tax payment once a bank wire transfer has been processed. It is also possible because the authorities have allowed dysfunctional banks to continue operating.

Kasyanov said the plan to hand over this mountain of probably inaccessible tax arrears to ARKO was agreed upon at a Cabinet meeting last Thursday. The plan seemed at odds with the Tax Ministry's determination to force banks to pay the taxes.

Officials at the Tax Ministry were not available for comment Wednesday.