Publication: Monitor Volume: 3 Issue: 231

The Russian government is still treading water in its efforts to improve tax collection. In the first nine months of the year federal tax receipts amounted to only 52 percent of the planned level. (Kommersant-daily, December 5) Federal revenues reached 205 trillion rubles in nine months ($35 billion), well short of the annual target of 434 trillion. Spending (excluding debt servicing) was 275 trillion rubles ($47 billion), against a yearly target of 530 trillion. Federal revenues are running at 10.6 percent of GDP, and spending at 14.2 percent of GDP. That leaves a deficit of 3.6 percent, to which one can add at least another 4 percent for debt servicing. Fifty-six percent of the deficit is being covered with foreign money.

More bad news for the government came on December 3, when the Federation Council voted down a draft law that would have obliged retailers to report to tax authorities the name and address of a customer buying an item worth more than 83 million rubles ($14,000). The tax authorities were particularly interested in sales of autos, boats, and jewelry. There are myriad ways for businessmen and high-paid employees in Russia to evade income tax, hence it would be logical and equitable to use the sales tax on big-ticket items to boost revenue. The senators tossed out the law on the grounds that it was poorly drafted: more likely they wanted to avoid a barrage of complains from their richer constituents. Many Russian press commentators complain that such transaction reports are a violation of human rights, not realizing perhaps that all cash transactions over $10,000 in the U.S. must be reported to the Treasury.

It remains to be seen whether the new finance minister, Mikhail Zadordnov, will have any tricks up his sleeve to improve tax collection. He has appointed Mikhail Motorin as Deputy Finance Minister. Motorin formerly served as chief of staff for the Duma budget committee, which Zadornov chaired. The number of deputy finance ministers has now grown to 16. With that many cooks, one would expect a better broth. (Rossiiskie vesti, 5 December)