Revolutionary keep your step

The government is updating the Tax Code on the move

Only 29 chapters of the Tax Code, perhaps, separate Russia from the road leading to prosperity and well-being. As First Deputy Minister of Finance Sergei Shatalov said yesterday, “the dust of the summer tax shocks has settled” and the first estimates can be made. The government is almost satisfied with the summer legislative work: four chapters of the second part of the code have been adopted - VAT, excise taxes, unified social and income taxes. It will not be possible to pass an income tax this year, but Mr. Shatalov expects that by the end of the summer Duma session of next year, work on the Tax Code will be completely completed. If this optimistic forecast comes true, then literally from January 1, 2002 the country will live under a complete set of new tax rules.

However, it is doubtful that it will be possible to force the tax reform to a victorious conclusion. It is also unclear whether it is worth working using Stakhanov’s methods. When the dust “settled” and the government carefully read the chapters adopted at an accelerated pace, many flaws were discovered. As the first deputy minister admitted, “many technical errors were made that pose a threat to the functioning of the adopted chapters.” The Cabinet believes that this can be corrected if appropriate amendments are adopted by the end of the year.

But although the amendments have already been submitted to the Duma and explanatory work is being carried out among deputies about their purely technical nature, it is not a fact that they will pass with a bang. It is enough that critics of the Code - communists - oppose the adoption of the amendments in three readings at once (as planned), and the process of correcting tax deficiencies may drag on. It is unclear whether the new taxes will be able to “function” then. The Ministry of Taxes and Duties, which will have to test tax theories in practice, is already expressing serious concerns in this regard. Many regions are looking forward to the New Year without joy. Moscow is feverishly looking for ways to compensate for losses from the abolition of turnover taxes, but other than the maximum - up to 5% sales tax from January 1 - they have not come up with anything. And not all local authorities are ready for change: decisions have not been made everywhere to introduce a municipal income tax of up to 5% starting next year. In order to prevent the collapse of local budgets, which need something to replace the canceled housing tax, the government wants to introduce an amendment according to which a 5 percent municipal tax will be in force in 2001, even where the authorities did not bother to set their own rate.

But if the second part of the Code were shortcomings caused by haste, then the first part, adopted two years ago and entered into force in 1999, simply did not please the government. At its meeting today, the cabinet will discuss five bills amending various articles of the first part. Some of them, according to Mr. Shatalov, are of a technical nature: for example, the definition of “property” will include the concept of “property rights”. There are also more fundamental amendments. Concerning, in particular, fines. Nowadays, a defaulter can only be fined by a court decision. It is proposed to write off fines in an undisputed manner from the accounts of debtors who agree with the punishment.

Mr. Shatalov himself described a number of amendments as “conflicting.” This concerns, for example, expanding the set of characteristics of interdependent persons, new rules for paying advance payments, changing the definition of a taxpayer, and the moment of tax payment. Now the tax is considered paid after the bank receives the taxpayer’s order to write off funds from the account if there is enough money in it. The government proposes to consider tax paid only after debiting money from a bank account.

This is only the first portion of amendments to the first part of the code. According to Mr. Shatalov, many more adjustments will have to be made. And judging by the mood of the deputies, it is obvious that correction of the general part will be very difficult.

But even if all chapters of the code are adopted next year (which is doubtful, given that for many chapters, for example on profit, there are alternative projects, and this may delay the process of their approval), tax reform will not end there. There is no limit to perfection, and the practice of applying new tax rules will certainly require legislative polish. Adjustment of the line, however, is characteristic of any revolution. The main thing is that the haste and radicalism of the first decisions do not lead to counter-revolution.

Svetlana LOLAEVA