Duke Policy News: IN THE FIELD: Russian Tax Reforms

Volume 25/1996-1997 contents | Duke Policy News Online | Sanford Institute

Only about half of Russian citizens are paying their taxes now.


Russian Tax Reforms

Alexander Pochinok, one of the principal authors of Russia's recent tax legislation, addressed his country's upcoming tax initiatives at a Duke conference on "Tax Reform in Russia: Critical Issues for American Businesses and Investors" in January. The conference was co-sponsored by the Institute's Center for International Development Research (CIDR), the Center for Slavic, Eurasian and East European Studies, and the International Tax and Investment Center.

Pochinok, Deputy of the State Duma and chair of its Subcommittee on Budget and Taxation, discussed flaws in Russia's current tax system and outlined proposals to correct them.

"The biggest problems with the Russian system of taxation are its complexity, lack of transparency, and conflicts between the laws," Pochinok said.

Russia has about 1200 legal documents related to taxation alone. Many state-supported industries depend on government funding. In order to continue that funding, the government will either have to print more money, which causes inflation, or raise taxes, said Michael Newcity, coordinator for Duke's Center for Slavic, Eurasian and East European Studies. "If they raise taxes, then citizens tend to spend more and more of their time trying to evade taxes," Newcity added. Only about half of Russian citizens are paying their taxes now, so a disproportionate percentage of the population pays higher and higher taxes.

The proposed new code will attempt to streamline current regulations, reducing the number of taxes and tax exemptions, Pochinok said. The code will also clarify taxpayer rights. Under the current system, taxpayers can be assessed a fine for alleged violations before any legal hearing has taken place. The first part of the new tax code has already been adopted by the Russian Parliament. The rest of the code is still being drafted and could become effective in 1999, said Pochinok.

Other conference speakers discussed:

  • Resources for Doing Business in Russia
  • Instruments of the Russian Capital Market
  • Taxation of Emerging Capital Markets
  • Policies and Mechanics of Value-Added Taxation
  • Fiscal Federalism in Russia
  • Tax Issues for the Petroleum Industry
  • Personal Income Taxation and Its Implications for Expatriate Staff
  • Russia's Tax Treaties
  • Resolving Disputes with the Russian Tax Authorities
  • Tax Reform in Kazakstan and Implications for Russia
  • Tax Union of the CIS Countries: Political and Economic Problems

Guest speakers included Judith Robinson of the U.S. Department of Commerce, Julia Mozharenko of the U.S. Government Tax Assistance Project, Victoria Summers of the International Monetary Fund, Charles McPherson of The World Bank, and Charles E. McLure Jr. of the Hoover Institution at Stanford University.

About 70 corporate executives, attorneys, academics, accountants, bankers and economists from across the U.S. attended the meeting, as well as a number of international participants. Additional support for the conference was provided by the U.S. Commerce Department, the U.S.-Russia Business Council, and R.J. Reynolds Tobacco International of Geneva, Switzerland.

-Adapted from an article by Noah Bartolucci of Duke University News Service.

Volume 25/1996-1997 contents | Duke Policy News Online | Sanford Institute