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Country Rankings - Russia

  • Dec 29, 2014   Russia: not sufficiently unfriendly

    Well, that has been quite a diversion through territory you may not have been expecting, but it brings us back to terra firma. The first thing to do is to get rid of all the shadow people and their organizations. Send them back to the universities and institutions they came from, where they can continue to win imaginary prizes for scratching each others' backs. As for our elected leaders, the second thing is that we need to tell them to stop spending money, and in particular to stop getting into debt. If we don't do those two things, then within two to three years the fairies will have succeeded in destroying the laboriously constructed international business house which sits today protectively over the heads of cross-border traders big and small, and it will be open season for every government inside and outside the OECD to take what it fancies under any old pretext, and fight it out in court with any taxpayer who is rich enough to stand up for themselves. If you doubt me, then just look at the behaviour of the British Government over the last two weeks, which has cast off the last fig-leaf of legal propriety and is allowing and perhaps even encouraging HMRC to introduce a series of ever more Draconian anti-business laws. By now, it probably calculates, might is right, and it will get first mover advantage, while other countries, which are in an even worse fiscal state than the UK, will have to play catch-up and won't dare to be as grasping as Perfidious Albion. We can expect to see Italy and France, both of which are going to be in desperate need of assistance from the unmentionables, persist with the statist game whatever the colour of their Governments. Russia now finds itself in the same camp, unexpectedly enough, although it has had a bad year in terms of international trade rules. So, execrations for all four of them. Australia, which is by now a sort of pallid resource reflection of China, hardly has a short-term future at all. Most of South and Central America has been practising being anti-internationalist for so long now that it should be becoming almost second-nature for them. India has lately shown the world just what it thinks of international law; so no surprises in that direction.
    Source: www.tax-news.com/news/Russia_To_Introduce_Grain_Export_Tariff____66806.html

  • Dec 18, 2014   Russia: certainty

    Vladimir Putin isn't lacking in intelligence. Indeed, most of his pre-political career was spent gathering it. But so blinded has the Great Leader become to the negative side effects of his manufactured hostility to the West that he could also be accused at times of making an enemy of common sense. Yet, despite the feeling that Russia's worsening economic problems are self-imposed, Putin has announced one sensible measure: that the country's tax rules should remain unchanged for the next four years. As an alternative, he could have announced tax incentives for foreign investors, and promised to rein in his tax inspectors, who, for years now, have been, as Prime Minister Medvedev put it a while ago, "terrifying" businesses seen to be not playing by the laws of Russia's bureaucratic jungle. But this is the next best thing I suppose. Investors can tolerate fairly high taxes, or find ways to mitigate them. Legal uncertainty however, is probably the multinationals' worst enemy. Whether Putin remains true to his word, only time will tell. It's certainly hard to see how the Government will avoid putting taxes up unless the price of oil rebounds, or – much harder to foresee – the Russian economy begins to grow again.
    Source: www.tax-news.com/news/Putin_Says_Tax_Rules_Should_Remain_Unchanged____66677.html

  • Feb 06, 2014   Russia: good thinking but it won't work

    It's easy to have a go at Russia this week, and almost everyone is doing it, between its cack-handed attempts to influence Ukrainian affairs and the giant, gilded hostage to fortune represented by the Sochi games which are close to turning Vladimir Putin into a laughing stock. So here is a rare bouquet for the Economic Development Ministry, which has sensibly proposed to reduce the rate of tax imposed on people who rent out their apartments. Well, perhaps it is sensible, and perhaps not. It sounds good, but if as they say 95 percent of private landlords are evading the 13 percent income tax that should apply right now, why would a reduction to 12 percent or 11 percent make any difference? Even if the rate was reduced to 5 percent, no-one will pay it, because paying it involves declaring the income and its source, and presumably all these shadow tenants pay in cash, and won't be at all happy to have their names revealed to the tax authority. Because where did they get the cash? There is plenty of multiple apartment ownership in Moscow, not least because during privatization anyone could privatize their flat for peanuts, so if your parents then died you got their flat as well, and now you have at least those two flats (without mortgages). This is why governments almost always resort to withholding taxes in order to fix on individual income streams, and why they try to minimize the use of cash. Property tax is more effective, because every property has to be registered in someone's name; but in Russia tax on individual property is minimal, and regional into the bargain, so central government doesn't get to see anything from it. Hence the proposed attempt at catching tenancy income. Anyway, it's only a proposal, from the Economic Development Ministry, the descendant of the old Gosplan Ministry, which is way down the pecking order, and it will probably be ignored. So, bouquet rather faded.
    Source: www.tax-news.com/news/Russia_Mulls_Tax_Break_For_Landlords____63553.html

  • Jan 30, 2014   Russia: understands SMEs?

    Of course it's positive that Russia is favoring SMEs. Or does it? As so often in that benighted country, one step forwards equals two steps back. It's great to give tax breaks to small enterprises: even the Russians, who view everything through some strange sort of distorted antiquarian, pre-capitalist lens, realize that small companies are more likely to generate jobs than large ones. But why restrict the tax-break to Russian-owned companies? It seems so obvious that ownership of companies is disconnected from their economic performance that it should be hardly worth discussing; yet for Russians, foreign = evil. You could have at least two views about this: either that Russia has suffered from centuries of economic persecution by foreign oppressors; or that Russians have a straightforward compulsion to deny foreign ownership of native assets. Perhaps the first caused the second. At all events, they just don't seem able to shake themselves out of this obsessive distrust of the West, and you have to ask yourself, to what purpose? All too often, the result is to damage Western perceptions of Russia, and in the end, Russia's own interests.
    Source: www.tax-news.com/news/Russia_Grants_Tax_Breaks_To_SMEs____63468.html

  • Jan 16, 2014   Russia: Olympic halo

    It would have been better if Russia had abolished its "recycling" fee altogether, but it has done the next best thing by removing the exemptions for domestic manufacturers. It's not like Russia to roll over so easily (it's only a few weeks since the EU and others complained to the WTO about the levy), so it's tempting to suppose that this is part of the Sochi effect, a general clearing out of difficult and embarrassing dossiers in advance of the Games in February. I wonder what other rabbits Mr Putin will produce from his hat during the next few weeks in order to bring us to the starting line in a glow of bonhomie? Perhaps he will invite the media to the secret palace he has apparently been constructing on the Black Sea coast and tell us where the money came from for this modern Versailles? Russian presidents already had a substantial villa near Sochi at their disposal, used for entertaining foreign dignitaries and just for relaxation, but this evidently wasn't enough for Putin. Estimates of the cost of construction of the new "cottedzh" range from EUR350m to 1 billion, but in its pictures it looks really rather dull, however grandiose.
    Source: www.tax-news.com/news/Russia_Adjusts_Law_On_Car_Recycling_Tax____63304.html

  • Jan 09, 2014   Russia: the pot or the kettle?

    Well now, this is rich: Russia is accusing the EU of unfairly penalizing imports which have benefited from low energy costs. I don't know where to start, I really don't! That the EU is protectionist hardly needs to be said, and Russia's behaviour over its automotive import levies has been egregious to a fault. I have just one word for both of them: C-O-M-P-E-T-I-T-I-O-N. Eat it for breakfast, guys, please, and stop yammering on about fairness. Russia has oil and gas, near the surface, and it costs hardly anything to extract. Obviously then it can produce energy-intensive goods more cheaply than say France which has to import its gas from Russia and anyway has higher wage levels (and they retire when they are 62 and live for another fifty years on the State, whereas Russians die from alcoholism at 58 and cost the State nothing). But vines only grow in limited parts of Russia, and as far as I know there are no truffles on the steppes. Comparative advantage is the economists' phrase to describe it. Russia should produce steel pipes, top models and violinists, and France should stick to Chateau Rothschild and expensive lingerie. It's so obvious, it's hardly worth saying, yet in Brussels it sounds like a foreign language. I ask you, how many Russian couturiers and first growth clarets do you know? Actually I do know one Russian couturier, but only because I met him at a party. A bottle of champanska for anyone who can tell me his name, but you have to come to our office to collect it.
    Source: www.tax-news.com/news/Russia_Complains_To_WTO_About_EU_Import_Tariffs____63239.html

  • Oct 31, 2013   Russia: in the corner

    Unfortunately we cannot say the same for Russia, which is pursuing its bloody-minded and self-destructive campaign against all that is good about international trade. Its latest offense is to refuse the EU's application to open a dispute resolution panel at the World Trade Organization over the matter of its blatantly protectionist recycling fee scheme. Cynically, this scheme, which amounts to an illegal import tax on foreign-made vehicles, was instituted virtually on the very day that Russia joined the WTO. With hindsight, it appears to have been a terrible international mistake to allow this bandit country into the WTO. If only there was a way of kicking it out again! The prim and proper administrators of the WTO have a touching faith in the reforming influence of their institution; sadly, when a country is determined to behave selfishly (to use the kindest possible word), and to break all the rules whenever it suits it, the consensual rules of the WTO go for nought. I say 'it' but of course there is no Russia in terms of international law, there is just a collection of oligarchs or worse, hell-bent on making their pile regardless of the interests of their fellow citizens and untrammelled by any moral code. London and Monte Carlo estate agents are the beneficiaries; but it wasn't meant to be like this. "We want to be a normal country," said the reformers in 1991, and they meant it. But as so often in Russia's miserable history, the fleeting moment of reform was soon overwhelmed by greed and the absence of the rule of law. It is easy to forget the importance of the rule of law, and the sacrifices that our ancestors made to enshrine it in our political systems. In Russia it never happened.
    Source: www.lowtax.net/asp/story/front/Russia_Rejects_EU_Panel_Request_On_Recycling_Fee_For_Cars____62482.html

  • Oct 03, 2013   Russia: doesn't get it

    Russia has just provided a perfect example of how not to treat your entrepreneurs, by doubling social security contributions for self-employed persons earning from RUB50,000 to RUB100,000 a month, by RUB35,600 (about USD1,500) each year. In March, an SME business association called on the Government to reverse its decision after a government representative admitted that 7 percent of self-employed persons had ceased operating. By September, 485,000 people were said to have canceled business registrations this year, and most of them are doubtless continuing to operate "in the black." So the Government has reacted by proposing a two-year tax break for entrepreneurs registering a business for the first time, in order to stem the mass exodus to the illegal economy. All government ministries have approved the plan and it is expected to come into effect next year. But what's the use of that? Most new businesses don't make a profit at first, and anyway, imagine the hoops you'd have to jump through to prove your numbers to the tax authority.
    Source: www.tax-news.com/news/Russian_Tax_Hike_Deters_Self_Employment____60106.html

  • Sep 12, 2013   Russia: on the wrong side

    Speaking of Russia, and indeed the US and the UK, these were the ringleaders of the G20's attack in St Petersburg last week on tax avoidance, by making automatic exchange of tax information the global standard, and agreeing to steps for cracking down on base erosion and profit shifting (BEPS). Vladimir Putin said that they planned to adopt a joint Action Plan for the prevention of BEPS; and the end-of-meeting declaration said that the G20 has been in talks with the OECD to create a single global standard for the automatic exchange of information. Now it's very easy for international political leaders to climb onto the morality bandwaggon and pontificate about how awful it is that individuals and companies evade tax, but to me the whole world has gone topsy-turvy. The present parlous state of the global economy and threadbare national treasuries is directly and unequivocally the fault of political leaders who have luxuriated in debt and spending over the last 20 years. Taxes and debt are both the highest they have ever been in almost all of the G20 countries, except in some places which are lucky enough to have plenty of black gold (Russia being one of them, actually). But instead of turning their efforts to cutting back on wasteful spending, which is of course politically very unpopular, these spendthrift politicians send up a barrage of criticism directed at "tax havens," which they would of course like to exterminate, and at companies which can't defend themselves and don't have votes. "In light of ongoing budget consolidation, the budget revenue base should be expanded. It causes widespread anger when companies operate in one country, pay taxes in the other, and take profit out of the countries where they operate and render services," says Russian Finance Minister Anton Siluanov, while Vladimir Putin says that the implementation of the G20's Plan should result in "a significant reduction in the practice of channeling profits into offshore accounts and an increase in tax payment in the jurisdiction where a given product or service is produced." In other words, increase already high levels of tax. That's all they seem to be able to think of. Why can't people see that it's the politicians who are the problem? Rhetorical question, of course; and the media are largely to blame for permitting and even encouraging the game to be played. So the grandstanding and the waste will continue, and a whole generation of young people in Europe face a bleak future. NEETs, they are called: Not in Employment, Education or Training. On a long-term view, what is happening is a shift of economic power from over-taxed and over-governed "old" countries to economically younger parts of the world, although that's no comfort to the NEETs.
    Source: www.lowtax.net/asp/story/front/G20_Forging_Ahead_With_AntiAvoidance_Action____61970.html

  • Mar 21, 2013   Russia: blows it

    And along the same lines, here's another government getting it comprehensively wrong: Russia has doubled the social security contributions it extracts from the self-employed and is surprised to find that there are suddenly fewer self-employed people. Well, actually, not, there are just as many as there were before, Vladimir, it's just that you can't see them any more. Ten years ago Russia did a very sensible thing and cut individual income tax from a maximum of 40% to just 13%, and needless to say it raked in more tax from a much higher number of people who were prepared to pay it. But good economic sense has gone out of the window in Putin's Russia, along with a lot of other good things.
    Source: www.lowtax.net/asp/story/front/Russian_Tax_Hike_Deters_Self_Employment____60106.html

  • Jan 03, 2013   Russia: being bearish

    Adopting children doesn't seem to be very close to international tax news, but of course in the Magnitsky affair the spring for later events was Russia's admission to the World Trade Organization, and after Russia's crass attack on American adoption of Russian children, there will be consequences for Russian/American trade and cooperation, although it is not easy to perceive yet what they may be. At all events, both countries deserve a black mark for having mishandled the matter, creating a major and unnecessary failure of international diplomacy, and certainly worsening conditions for companies doing business in Russia. The story starts with the Johnson-Vanik amendment in 1974, which withdraws Permanent Normal Trade Relations (PNTR) from countries with human rights abuses. Year after year, Congress has granted a waiver to Russia, but when Russia joined the WTO last year it was obliged to give the country permanent PNTR. This legislation was duly passed, but as a result of the Magnitsky incident (Russian lawyer assumed to have been killed in detention for trying to expose state involvement in the theft of US business assets) clauses were added in the House punishing Russian human rights violators with visa denials and asset freezes. The Magnitsky legislation may be justified, and might even have been effective, but it seemed an error to attach it to a trade bill, and the White House, to its credit, tried but failed to avoid that conjunction. It was inevitable that Russia would respond, and now it has, but in such a heavy-handed way that I fear some further escalation. The chairperson of the Russian Duma's Family, Women and Children Committee called it "using children as human shields." If we're lucky it will all blow over; but it's a sour end to a sour year, and nothing will now help the thousands of children incarcerated in Russian orphanages.
    Source: http://www.usa-tax-news.com/story/Congress_Approves_Permanent_Normal_Trade_Relations_With_Russia____58684.html

  • Sep 13, 2012   Russia: calls a spade a spade

    Russians have a rooted contempt for what they regard as wimpish Western political correctness - all Russian men revel in being sexist. I remember being startled when in my office in Moscow there appeared a outrageous spoof poster about the role of women at work which would have sent the perpetrator straight to the dungeons in the West; yet the girls (who were in a majority) thought it was hilarious. So it is a surprise that Russia would have signed up to the international bribery convention (tongues firmly in cheek), and quite funny that they now say bribes (although illegal) must be reported in financial statements, but are not tax deductible. Only in Russia, and they get a star for that piece of realism.
    Source: http://www.lowtax.net/asp/story/front/Russia_Confirms_Bribes_No_Longer_Tax_Deductible____57244.html

  • Aug 09, 2012   Russia: deep in primroses

    It's never quite easy to work out what real motives lie behind the behaviour of the Kremlin, and last week's threat to hike car taxes is a case in point. You can believe, if you are Alice in Wonderland and you haven't had breakfast yet, that it is indeed part of a general move from direct to indirect taxes; and given the difficulty of tracking income in a cash-using country like Russia, you would have to say that this is a correct policy. The trouble is, that coming in the week when Russia finally signed up to the WTO, it looks suspiciously like a piece of advance damage limitation: bounce up the costs of owning an expensive car in order to protect the still-hopelessly-inefficient Russian cheapo car industry. Russia is another country that doesn't 'get it', although its history is the opposite of Brazil's. 'I want to suppress excessive personal consumption,' says Vladimir Putin. Sorry, wrong! You should want to encourage excessive personal consumption, if anything. And anyway, it's none of your business, what people consume or don't consume. The results of your and your predecessors' obsession with restricting the behaviour of successive generations of Russians can be seen on every beach and in every night club in Europe and beyond, where indeed they consume excessively and excessively loudly. Thank goodness. What you should do is to start asking yourself why they choose to do their consuming outside Russia, rather than Gradgrinding your way onto the wrong side of history. Well, you're already there, so there's no helping you, I suppose. Come back, Boris Nikolaevich, all is forgiven!
    Source: http://www.lowtax.net/asp/story/front/Russia_Hikes_Taxes_On_Cars____56561.html

  • May 17, 2012   Russia: marches into the WTO

    It's not often that I have a good word to say for Vladimir Putin; but, credit where credit is due, he has seen off the vested interests of his domestic protectionists who would like to continue making money from foisting antiquated Soviet-era goods on hapless consumers and is insisting that Russia should forge ahead with the process of joining the WTO (the best of all Good Things, of course). Who would have guessed it?
    Source: http://www.lowtax.net/asp/story/front/Putin_Backs_Ratification_Of_WTO_Commitments_This_Year____55374.html


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