Russia: No Tax Man Ever Had It Tougher

Boris Fyodorov undertakes a crucial crackdown on cheats

Boris G. Fyodorov, 40, was recently appointed to one of the toughest jobs in Russia. The new director of the State Tax Service must find ways to improve Russia's chronically poor tax collection record. Only 5 million out of 150 million citizens hand in tax returns. Companies regularly stash their income overseas. And industrial groups favored by the government have been allowed to ignore taxes with impunity.

Fixing Russia's tax system is key to stabilizing the country's precarious finances--and persuading both international investors and the International Monetary Fund to pump more money into the economy. Without a financial package to shore up its dwindling hard currency reserves, Russia may be forced to devalue its ruble, striking a serious blow to its reform process. On June 23, Russian Prime Minister Sergei Kiriyenko and President Boris N. Yeltsin asked the Duma to approve an anticrisis package of tax and spending cuts, aimed partly at meeting IMF demands for radical action.

Fyodorov, a straight-talking banker and former Finance Minister who helped fight Russian inflation by slashing industrial subsidies a few years ago, is also moving quickly to crack down on tax delinquents. He is denying oil companies that do not pay their tax bills access to export pipelines. He is creating a database of the country's 1,000 richest citizens and checking up on their tax payment records. And to show he means business, on June 20, Fyodorov toured Moscow markets and gas stations to check how many were providing receipts, a sign that they record sales and pay taxes. None were. Now he has launched a massive campaign to ensure merchants use cash registers.

It's a good start. But Fyodorov, like his predecessors, will have a hard time succeeding.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE