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Press Review: The Economic Effects of Tax

  • Ron Synovitz

Prague, 10 April 1997 (RFE/RL) -- Western newspaper commentary today focuses on economic reform issues in Russia. Tax collection and conspiracy theories involving foreigners are among the leading topics of debate.

A guest columnist in today's Wall Street Journal (F-706), Scott Antel, says business in Russia is being stunted by the push to raise tax revenues and meet International Monetary Fund requirements for a 10,300 million dollar loan. Antel, a tax lawyer with the Moscow office of the international consultancy Arthur Andersen, admits that the measures have had temporary success in raising tax collection statistics. But he says policies are threatening the very existence of many firms by squeezing more from existing taxpayers and driving virtually A-L-L small businesses underground in order to survive. He says a better policy would be to keep companies going or growing today so that they can pay taxes tomorrow.

Antel complains that Russia's tax system is "incomprehensible and economically irrational." He says a list of examples is "frustratingly endless." Taxpayer bank accounts are frozen for alleged tax deficiencies without adequate reason or legal support. Authorities contemptuously refuse to pay tax refunds, and compliant taxpayers are harrassed with re-audits of previous years that apply current rules retroactively.

Antel concludes that "the current approach is going nowhere." He says a productive reform would be to start treating those who enter the system fairly. He writes: "What Russia needs most from policy makers are policies that introduce, foster and maintain a rule of law" adhered to by both government and its citizens.

A story in today's Financial Times of London by Moscow correspondent Chrystia Freeland (F-702) describes how imposter tax inspectors trick small businesses all over Russia to pay fines. Freeland says the enterprising bandits forge tax service identity cards and wear fake uniforms. She says victims often are reluctant to report the robberies because they are afraid of attracting attention of real taxmen who might force them to pay more fines. Freeland warns that Russian tax police do N-O-T have the right to collect taxes in cash.

Freeland today also writes a news analysis in the Financial Times (F-700) about Gazprom boss Rem Viakherev's speech to the Communist-dominated Duma. Freeland says Viakherev won support for his "flag-waving accusation" that a "conspiracy of foreign companies" was trying to break up Russia's natural gas monopoly. Viakherev said the conspiracy involves U.S. oil and gas companies, the International Monetary Fund and the Russian finance ministry.

Freeland says the episode shows Gazprom is now "on the defensive," and suggests that the company has switched its attention to the legislature in order to counter the growing influence of reformers in the cabinet. She concludes that the legislature overwhelming endorsed Viakherev's position because Duma members are "sensitive to the nationalist appeal" and "aware of wealthy Gazprom's importance in election campaigns."

An analysis by Phil Reeves in today's London daily Independent (F-800) says that the political situation in Russia appears to have improved for Russian President Boris Yeltsin since last year. The Chechen war has ended, fears of Communists and nationalists taking control of the Kremlin have evaporated and in-fighting between powerful government officials has subsided into bickering.

But Reeves warns that "the calm is misleading." He says "the landscape is littered with lethal snares." Russia's armed forces remain on the verge of collapse, Moscow is still failing to meet its tax collection targets, and the country is "littered with vast, filthy, Soviet-era industries that are either producing unsaleable products or have shut down."

Reeves says most Russian businesses that are making money are "heavily infiltrateed by criminals, many of whom work hand-in-hand with corrupt officials." He concludes that moves for a deeper union with "even more depressed Belarus" could prove to be a heavy economic burden on Russia.
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