The problems arose because of a letter from the Ministry of Finance dated December 21, 2004, addressed to the Federal Tax Service. Officials explained to tax officials that when entrepreneurs pay for the services of non-departmental security, they are in fact financing a government agency for a specific purpose. The fact is that since January 2004, non-departmental security has transferred all its income to the budget, which finances its work through the Ministry of Internal Affairs. Therefore, the Ministry of Finance concluded, under Article 251 of the Tax Code, companies do not have the right to write off their expenses on state security to cost price and exclude them from the base for calculating income tax. “Since these are targeted funds, then the clients of [non-departmental] security will have to pay taxes,” says a Ministry of Finance official.

The Department of State Property Protection of the Ministry of Internal Affairs, which is responsible for the non-departmental security, declined to comment. A high-ranking official of the non-departmental security department of the Ministry of Internal Affairs calls the Finance Ministry's decision "absurd." "It will be more profitable for businessmen to enter into security contracts with private security companies, because in this case their expenses will be deducted from tax payments," he complains.

The Tax Code provides for two conditions for deducting expenses: they must be economically justified and documented, recalls leading lawyer of the Irsan agency Maxim Yakovlev. The officials' decision left him perplexed, because "both of these conditions are met with security expenses." "It turns out that one government agency is depriving a government structure of income," says Yakovlev. Now businessmen will really have to pay income tax without taking into account state security expenses, says expert of the legal company Pravovest Lyudmila Yakushechkina. They will be able to challenge the Finance Ministry's decision only in court, and if it takes the tax authorities' side, then businessmen will also have to pay penalties and fines for unpaid taxes, the expert regrets.

An employee of the non-departmental security department hopes that the case will be resolved without going to court. According to a government decree issued last week, the department will be transformed into the Federal State Unitary Enterprise “Security,” which will provide all services to entrepreneurs. “If this Federal State Unitary Enterprise becomes a commercial enterprise and pays taxes, then only in this case will taxpayers be able to exclude their fees from the taxable base of the profit tax,” the official explains.

This will be beneficial for businessmen who cannot refuse state security services. For example, says Vladimir Antonov, Chairman of the Board of Directors of Converse Group, bank alarms must be connected to the control panel of non-departmental security, according to the law, since only they have the necessary licenses to provide such a service. “The costs of such security are aimed at maintaining the normal functioning of the bank,” says Yaroslav Semenov, Chief Accountant of IMPEXBANK. He hopes that officials will come to their senses and, in one way or another, allow security costs to be written off as cost.

The Ministry of Finance offended the security