Russia turns to tax collectors to stave off economic disaster New head of agency targets companies, richest and vendors

June 27, 1998|By Will Englund | Will Englund,SUN FOREIGN STAFF

MOSCOW -- Cheating on taxes has gotten so out of hand here that it poses a bigger threat to Russia's fragile economy than the tumbling stock market or ballooning interest rates, Boris Fyodorov, the new tax chief, said yesterday.

With revenue from oil sales falling, Russia's only hope of avoiding a ruinous devaluation of the ruble this summer is to start pulling in what its citizens owe in taxes.

But Fyodorov has to accomplish that with a woefully underpaid and unqualified tax service that, he said, is ridden with bribery and corruption.

And, by his own estimation, he has a matter of weeks to do it.

Fyodorov, a former finance minister and World Bank official, was lured back into government service three weeks ago. Now, he is going after big businesses that already pay most of Russia's taxes.

He's going after market vendors and taxi drivers who neglect to issue receipts or keep track of their income. He's going after the 95 percent of Russians who don't file income tax declarations. And he's going after the truly rich.

His dream, he said yesterday, would be to see five or so of Russia's wealthiest citizens in handcuffs, maybe spending a night in jail. "That would make an impression," he said.

Russia has a long history of tax avoidance. Its current system, Fyodorov told an American business group here yesterday, is partly a remnant of the old Soviet system, partly an ad hoc creation, and partly "a firefighting operation because of constant financial problems."

Tax laws are murky at best and penalties harsh. Yet a company that faithfully tried to pay all its taxes could fork over up to 100 percent of its income.

So cheating is nearly universal and about the only weapon the government has been able to wield is the 40,000-strong tax police force, whose members, Fyodorov said, know little about finances but "like to don these masks and run around with guns and show a lot of muscle."

His goal, he said, is to recreate the tax service as an agency that is "civilized" but relentless in the pursuit of cheats.

Time is running short. The Russian stock market fell nearly 5 percent yesterday. The central bank raised its key rates from 60 percent to 80 percent. Most worrisome to average Russians was continued downward drift in the value of the ruble.

President Boris N. Yeltsin canceled a trip to Kazakstan and may cancel a later trip to Ukraine, because of the economic crisis.

Russia also promised yesterday to reduce exports of oil by 100,000 barrels a day, which could help shore up its price but will hurt revenues in the short run.

This puts the pressure on Fyodorov and his tax service. If the government can raise more revenue, it stands a better chance of winning new loans from the International Monetary Fund, of supporting the ruble near its current value, of paying off the thousands of miners and teachers and pensioners who haven't been paid in months -- in other words, of staving off economic disaster.

"My agenda is very short-term," Fyodorov said. "We have to do certain things now."

He says the Communists are wrong when they argue that there just isn't enough money in Russia.

There's plenty, he says, but it's hidden from sight in what amounts to criminal sleight-of-hand. And the 300,000 or so tax collectors and inspectors and enforcers in Russia -- "probably more people collecting taxes than at any time in human history" -- have little idea how to go about finding it.

The 40-year-old tax chief is trying to hire a few smart people who can help turn the whole system around. He is supporting a package of reforms that would reduce the taxes on business in order to stimulate the economy.

And he himself has taken to doing a little enforcement. He rides private minibuses and patronizes vegetable and fruit sellers in Moscow's markets, looking for receipts that never materialize.

He tells the culprits they should be ashamed of themselves for taking money out of the pockets of pensioners and invalids.

His staff has complied a list of the 1,000 richest Russians, for particular scrutiny. And he has vowed to take on big companies that consider themselves so powerful they are immune from paying taxes.

"We shall show to them," he said, "that we can do some things that are very nasty."

Pub Date: 6/27/98

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.