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Russia: Tax Case Reveals Strains Between Center And Regions

Kazan, 20 November 1996 (RFE/RL) -- The Russian government's recent attempt to boost tax revenues provides a good illustration of how tensions can be quickly fanned between central authorities and outlying regions.

The case of the Kamaz truck company of the Tatarstan Republic is an example. Once the dominant truck manufacturer of the Soviet Union, some 150,000 trucks plus 100,000 heavy engines annually used to roll off the Kamaz assembly lines.

It was once the biggest employer in Tatarstan, a scenic little republic in central Russia which produces a wide range of advanced technical items. But because of the collapse of the Soviet system and a disastrous fire in 1993 which destroyed the engine facility, Kamaz production has dwindled to a pitiful 4,000 trucks and 120,000 engines yearly.

That didn't stop the Russian government late last month from naming Kamaz, now a joint stock company, as one of the four top tax evaders in the Russian Federation. It instituted bankruptcy proceedings of some 70,000 to 80,000 million rubles (about $13 million to $14.8 million) in unpaid taxes.

This of course immediately aroused the ire of the republic authorities, who pointed out that the Russian federal authorities are in debt to Tartarstan to the tune of some 300,000 million roubles.

An indignant Tatar President Mintimer Shaimiev jeered Moscow for "trying to get milk from chronically undernourished cows," and said any action against Tartar companies taken without Tatarstan's approval would not be obeyed. He sought a meeting with Russian President Boris Yeltsin, which was not possible because of Yeltsin's health, so Shaimiev hastened to Moscow to see Prime Minister Viktor Chernomyrdin.

Shaimiev was able to halt the proceedings against Kamaz, and there was a joint decision to set up a panel to decide what tax figures should be assigned to which time period -- a rather academic exercise which avoids any painful action. Shaimiev also suggested that the Kamaz debt be deducted from the amount the federation owes Tatarstan -- a neat paper transaction unlikely to be of much interest to Moscow.

While it lasted, the disagreement fuelled the sharp resentments often felt in the regions about directives from Moscow. The Tartar press gleefully portrayed Shaimiev in a Kamaz vehicle running down the central tax authorities.

As for Kamaz itself, it has big plans to break out of its present difficulties. It has upgraded and modernized its range of vehicles, which are noted for their toughness. The latest engines are low-pollution models developed in conjunction with the U.S. company Cummins and with financial help from the European Bank for Reconstruction and Development. The road ahead for Kamaz will be rocky, however, whether or not it carries a tax sticker from Moscow on the windshield.