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. Last Updated: 07/27/2016

Embarrassment Part Of New Tax Strategy




One of the toughest warnings issued by Russian tax boss Alexander Pochinok at a news briefing was: Mind your revenues or we will embarrass you!


Speaking about how the Tax Ministry will increase tax collection in 2000, Pochinok revealed Friday several steps the ministry will take, including strict monitoring of revenues.


"Look at what has happened during the electoral campaign: [Yabloko leader] Grigory Yavlinsky, who, by the way, otherwise was accurately paying all his taxes, forgot to mention his pay for just one lecture," the tax minister said.


Yavlinsky - as well as a few other well-known candidates in the State Duma - was apparently embarrassed when such facts were made public by the Central Election Commission as it processed parties' registration for the Dec. 19 elections.


In 1999, the Tax Ministry collected 8 percent of gross domestic product in taxes, or 340 billion rubles [$1.19 billion] for the federal budget and came up with 144 percent of what was planned in the budget for 1999, Pochinok reported, adding that in 2000 his ministry plans to collect taxes that will amount to "at least 9 percent of [growing] GDP."


Pochinok said his ministry has already started to create a "unified information tax system throughout the country" - a system of 10 major tax centers that will accumulate and process tax records of all companies and individuals. This will eventually mean all will have to be registered, using special identification numbers.


He said a pilot center has already started operating in Moscow and is compiling tax records on high-profile individuals.


"It processed 15 million units of information last year for Moscow and the Moscow region and earned an additional 1 billion rubles for the state coffers. All the stories linked to nonpayment of taxes by various candidates to the State Duma come from there, not that we were not seeking [compromising information] ourselves."


Pochinok said the structure of the tax service badly needs modernization. "We technically can't go on collecting taxes the way we used to. Taxpayers are getting smart very quickly and they globalize their businesses.


"Now we have companies that extract something in Siberia and move it through the whole country to export it; the office is in Moscow; the address is in Uryupinsk [a small town in the Volgograd region that to Russians symbolizes provincial backwardness) and the bank accounts are on Nauru Island [a South Pacific tax haven]."


Pochinok said sending a tax inspector to such businesses is useless.


"When we tried to sort out the situation with the Bank of New York accounts, we found a long, long chain of information. When the centers are created, all such information will go to them."


The ministry aims to put in order several lucrative, but so far chaotic markets, including television sales - "nine out of each 10 are being sold without any tax being paid" - and flower sales - "the volume of which in Moscow alone is bigger than the budget of a provincial town." No tax is paid on at least half of flower sales, Pochinok said.


As for the imminent law on the control of big-ticket purchases, which was delayed for a year by the last State Duma in January 1998, Pochinok said buyers should not fear being confronted as they shop.


"You should not think that from Feb. 1 everyone will be questioned where he or she got the money to buy a car. We are introducing a basic order - we are creating a file with tax records for every person. If a big-ticket purchase is made, the seller will be asked to provide us with the information that some citizen Ivanov bought a car, or an artwork, or an apartment, or a dacha and we will collect it.


"In the case of a significant difference between the price paid and declared taxes, we will question people about where their money came from. But at the moment we can only ask. In the future we will need to change the legislation because it is now too flawed [to take serious action]."


To boost tax collection in 2000, the Tax Ministry is also planning to extend tax agreements with the biggest Russian corporate taxpayers.


"These companies will be committed to paying taxes in cash only. Holding companies will pay taxes for their affiliates, and strict schedules for tax payments will be drawn up.


"This year will be tough for tax debtors: They will face bankruptcy proceedings if they don't pay."