Publication: Monitor Volume: 4 Issue: 112

The June 8 arrest of Yuri Yurkov, the head of the State Statistics Committee (Goskomstat), and several other agency employees has disturbing implications for the viability of the tax crackdown which was announced last week by Boris Fedorov, the newly appointed head of the State Tax Service.

Reports suggest that the Goskomstat officials had been lowering production figures at major enterprises in order to reduce their tax liability. Economists had long suspected that Goskomstat figures were unreliable–but it was assumed that this was due to incompetence, and not venality. This development raises yet another set of doubts about the state’s ability to collect taxes effectively and fairly. Yurkov’s arrest could signal a new seriousness about tackling corruption in high places. But can one trust the procuracy, Federal Security Service (FSB) and Interior Ministry to carry out such a campaign? There have been many accusations that FSB and police officials themselves are involved in shakedowns.

Just last week, on June 5, the newly appointed head of the State Tax Service, Boris Fedorov, announced that he is drawing up a list of the richest 1,000 people in Russia in order to get them to pay their fair share of taxes. On June 9, Fedorov returned to the fray, revealing that he had fired several senior officials at the tax agency on suspicion of corruption. While most commentators recognize that rich Russians are adept at tax evasion, there are grounds for doubting the sincerity of Fedorov’s campaign. It was a year ago that newly appointed First Deputy Prime Minister Boris Nemtsov announced that all state officials would have to sell their foreign limousines and buy Russian cars. What happened? After a couple of well-publicized auctions, the whole issue was quietly dropped. A similar fate probably awaits Fedorov’s list of the “rich and famous.” (Kommersant Daily, June 6 and 9)

The same day that Fedorov made his announcement, the State Duma adopted on second reading a bill on that would require individuals to report all cash transactions over US$27,000 (2,000 times the minimum wage). Firms would have to report cash transactions over US$270,000. The bill is designed to flush out money laundering and unreported earnings. The proposal has been doing the rounds of the Duma for two years. It has been consistently opposed by the presidential administration, and by the majority of the Russian media, who curiously portray the measure as a violation of human rights–not, perhaps, aware that in the United States, all transactions above US$10,000 have to be reported.