Putin Seeks to Return Investigators’ Power to File Tax Charges

President Vladimir Putin is asking lawmakers to give investigators the power to open tax cases without involving the tax service, undoing a measure his predecessor put in place to improve the business climate.

The proposal, submitted by Putin to the lower house of parliament on Oct. 11, would undo changes passed under then-President Dmitry Medvedev in December 2011, according to the bill on the State Duma’s website.

“An analysis of the law’s implementation has shown that the detection of tax crimes has been reduced significantly,” Dmitry Peskov, Putin’s spokesman, said by telephone today.

Russia’s government is reviewing tax policies as it struggles to boost revenue and revive economic growth, which has stumbled to its slowest since 2009. Medvedev, now prime minister, said in 2008 that it’s time to “stop ‘nightmarizing’ business,” a coinage he also used while attempting to reduce corruption and other constraints on enterprise.

“This is a step backward,” said Igor Yurgens, a vice president of the Russian Union of Industrialists and Entrepreneurs, a lobby group for big business. “Law enforcement agencies haven’t been reformed, and the excesses there are off the charts.”

‘Two Sides’

The Investigative Committee, which probes tax crimes in place of the Interior Ministry, is a force behind undoing Medvedev’s move, Vedomosti reported, citing an unidentified government official. The Finance and Economy ministries weren’t consulted on Putin’s plans, the newspaper said.

“The state’s job is to collect taxes and make sure that the greater number of agencies allowed to open tax cases doesn’t lead to greater pressure on business,” Peskov said.

Putin ordered Medvedev’s government to boost Russia’s standing in the World Bank’s Ease of Doing Business index to 20th in 2018 from 120th as part of a long-term growth plan he set out hours after his inauguration in May 2012. Russia’s economy expanded 1.2 percent in the second quarter from a year earlier, the sixth straight quarter of slowing growth, while the Finance Ministry last month widened its budget-deficit forecasts for the next two years.

“When law enforcement lost the right to initiate tax cases in 2011, the atmosphere definitely improved,” said Yurgens, who also served as an adviser to Medvedev while he was president. “Now the siloviki will get back to their old habits, again terrorizing business.”

To contact the reporters on this story: Evgenia Pismennaya in Moscow at epismennaya@bloomberg.net; Scott Rose in Moscow at rrose10@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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