Lowtax Network

Back To Top

When bashing the rich is a good gimmick - By Kitty Miv, Editor

Kitty Miv, Editor
16 February, 2012

Czar Vladimir XXV (otherwise known to you and me as Mr Putin) has evidently been reading the Financial Times; or maybe his aides picked up the idea from Mr Cameron or Mr Sarkozy at Davos two weeks ago. Whatever, he has realized that bashing the rich is a good gimmick when you're facing election and your ratings are way down. Putin's particular take on rich-bashing is to invent a tax on the oligarchs' 'ill-gotten' gains from privatization in the 1990s.

If it's just a piece of electoral propaganda, then fair enough, I suppose. From any other perspective it's daft, like Roi Nicholas's financial transactions tax. First of all, which oligarchs does he have in mind? Among those who rose to prominence in the 1990s, several are in exile, one is in prison, and the rest are his partners in Kremlin Incorporated, the world's largest industrial combine. So he is going to tax himself. Oh well, anything to get re-elected.

What gets to me, though, is that the apparatchiks are re-writing history - nothing new about that, of course, they were at it again this week with the Magnitsky case - but the Russian people deserves better. For years now there has been a campaign in Russia (and among credulous Western camp-follower journalists, who should know better) to portray the oligarchs as a bunch of criminals who lied, cheated and murdered their way to riches on the backs of the oppressed Russian populace.

It so happens that I was working in Moscow from 1992 to 2000, and I know what really happened. Lying, cheating and murdering there certainly was, but by and large it was done by the State and its henchmen. The oligarchs were no saints, but they succeeded in the main by following Western managerial principles in order to create well-run and heavily capitalized businesses in a resource-rich country. Of course they bribed; that was and is the only way to survive in Russia. And of course they exported cash illegally ('capital flight'), calculating correctly that if they left money in Russia it would be stolen by the State.

So how did they come by their companies in the first place? Not really through privatization, oddly enough. In the first great wave of privatization (vouchers were distributed to all and sundry) there was a process of consolidation which led to the creation of a raft of small- to medium-sized businesses and a functioning stock market, but few major private firms emerged. It was 'loans for shares', now conveniently forgotten by the Kremlin, which did the business: as the State began to run out of money in the mid-1990s, bankers lent the State money on the security of shareholdings in the really important State-owned producing assets in the gold, oil, timber, and other resource sectors. When the State couldn't repay the loans, the shares changed hands at laughably low prices, and it was this that made the fortunes of the oligarchs. Hardly their fault, then?

Rather than languishing in gaol or exile, people like Mikhail Khodorkovsky need to be congratulated for having created a vibrant and successful industrial sector out of the decrepit ruins of the Soviet Empire, instead of which the State is busy trying to steal back what it lost, no doubt in order to ruin it all over again. Perhaps one day even the Russians, who say that they want to have a 'normal' country, will wake up to reality and throw out their corrupt and inept rulers. In the meantime all the ones who can afford to are sunning themselves on the beach in Cyprus or lounging around their penthouse swimming pools in Mayfair instead of helping to rebuild their country. And who can blame them?





About the Author

Kitty Miv, Editor

Kitty was born in Argentina in 1960 to a Scottish cattle rancher and his Argentine wife. Educated in Edinburgh and at Princeton, Kitty worked for the World Bank as an economist, where she met and married an emigre Iranian banker. During her time with the Bank, Kitty worked in a number of emerging markets, including a spell in the ex-USSR as a Transition Economies Team Leader. Kitty is now a consultant in Brussels and has free-lance writing relationships with a number of prominent economic publications. kitty@lowtax.net


« Go Back to Blogs

Blog Archive

Event Listings

Listings for the leading worldwide conferences and events in accounting, investment, banking and finance, transfer pricing, corporate taxation and more...
See Event Listings »