Akademik

   Since independence, the Russian taxation system has regularly been criticized as one of the country’s most pernicious problems. Under Boris Yeltsin, it was estimated that barely one-half of all tax revenues were collected. In 1999, a major reform of the system was initiated, focusing on simplification and the elimination of loopholes. Under Vladimir Putin, there has also been an attempt to lessen the burden on businesses and individuals. One of the mainstays of the system is a profit tax on corporations; however, firms developed extremely effective mechanisms for avoiding reporting gains. A popular saying in Russia is: “If a company reports a profit, then it has a bad accountant.” Other sources of tax revenue for the federal government include a capital gains tax, a 13 percent personal income tax, the Unified Social Tax to support the welfare and health care systems, a value-added tax or VAT (18 percent on most goods), customs duties, and federal license fees. Asset taxation is an important source of income for regional governments. Other funds come from taxes on real estate, gambling, and transportation, as well as sales taxes and excise taxes on luxury goods, tobacco, and alcohol.

   Income taxes on foreign residents are often higher than those on Russian citizens, but profit taxes are lower in order to attract foreign investment. Taxes on the oil and natural gas industries are critical to the government budget. Mikhail Khodorkovsky, once Russia’s wealthiest person, was arrested in 2004 on fraud and tax evasion charges, though politics are thought to have been the driving force behind his detention.