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Russia: Officials Vow To Squeeze Tax Debtors

Moscow, 12 November 1997 (RFE/RL) -- Top Russian officials have vowed to crack down on major tax debtors in an effort to boost flagging revenues as lawmakers gear up for key votes tomorrow on several draft tax laws and the 1998 budget.

First Deputy Prime Minister Anatoly Chubais said Monday the government is preparing what he called "an unprecedented action plan" to boost revenues and slash spending, but gave no details.

First Deputy Finance Minister Vladimir Petrov told a news conference yesterday that the plan would target companies with the biggest debts. As he put it: "So far this work was conducted in a sort of wave-like way. We hope that this time the wave will crest and bring with it budget revenue."

He said a new meeting of the Provisional Emergency Commission, created last year to squeeze funds from tax deadbeats, is expected to meet soon to force the biggest debtors to pay up.

The new crackdown on tax evaders comes after the International Monetary Fund last month decided to suspend payments under a $10 billion loan to Russia, citing chronic problems with tax collection. The government has collected about 52 percent of planned tax revenues for the first nine months of 1997, forcing the Finance Ministry to slash spending to keep the budget deficit in line.

The State Duma is planning to vote tomorrow on some 11 draft tax laws, which the government submitted last month after it became clear that passage of the proposed tax code would be delayed.

Petrov said the package of extra tax laws were key to ensuring the government meets the revenue targets outlined in the draft 1998 budget, which lawmakers are scheduled to consider in a first reading also tomorrow. He said the budget would lose up to 15 trillion rubles ($2.5 billion) if the tax bills, which remove exemptions and raise certain taxes, were not passed.

According to Petrov, the government expects to collect 340 trillion rubles in budget revenues this year, well below the planned 434 trillion rubles in the original 1997 budget.

Prime Minister Viktor Chernomyrdin said yesterday the government's emergency revenue-raising plan should be finalized over the next few days. He said it would follow a presidential decree, signed over the weekend, banning the use of monetary offsets to pay for tax debts as of Jan. 1, 1998.

Chernomyrdin also said that a trilateral commission, composed of members of government and both houses of parliament would work to find a compromise on overhauling Russia's tax system. He said that a new tax code must be adopted in the first half of next year.

Critics have charged that the widespread use of offset schemes, which allow tax arrears to be canceled against state debts to enterprises, exacerbates the government's fiscal crisis.

The head of the State Tax Service, Alexander Pochinok told a separate news conference yesterday the banning of monetary offsets was aimed at boosting tax payments in cash, a move that would help the government pay a massive backlog in wage arrears. He said the 10 biggest tax payers actively use offset schemes.

In his words: "We understand that it is difficult for them to search for 'live money'. Nevertheless, I expect a serious increase of cash receipts (as a result of this decree)."

In another sign the government is stepping up tax collection efforts, Pochinok said he has proposed to create a special tax inspectorate to monitor the capital flows of Russia's biggest companies to make sure they are paying their taxes. He also said the State Tax Service was hoping to be granted powers to work directly with enterprises to restructure their debts, a process that is done currently through the relevant ministries.

He warned that the tax authorities would pursue bankruptcy more vigorously if companies fail to pay up. As he put it: "If an enterprise does not agree to restructure voluntarily, we will ask tax police to arrest its assets or start bankruptcy proceedings."

Pochinok said oil companies remain the biggest tax debtors. But he said a new scheme allowing oil companies additional pipeline space in exchange for a pledge to pay taxes regularly could turn the situation around. Under the scheme, oil companies must pay up back debts by various deadlines starting Nov. 15, otherwise the pipeline space will be revoked.

More than a dozen oil companies have signed agreements with the State Tax Service and the Fuel and Energy Ministry, giving them extra pipeline space freed up after the state's oil export program was scrapped. Competition for pipeline space is fierce and oil companies can make more money by selling output abroad where prices are higher and customers pay regularly.

Pochinok added that he hoped the scheme will eventually extend to all pipeline space, a move that would prevent oil companies from exporting any of their output if they fail to pay taxes regularly.