Tax Czar Splashes into Rough Water
Boris Fedorov, Russia’s new chief tax collector, seems to enjoy making people nervous. He likes to talk of putting celebrities in handcuffs and of dragging rich people off to jail.
Since taking the job in late May, he has ordered a prominent member of parliament to pay back taxes and has threatened to collect $1 billion more from foreign businesspeople. He has joined tax police on a raid of a vodka warehouse and lectured sidewalk vendors about keeping proper records of their sales.
Fedorov, a 40-year-old, Western-style economist, is on an urgent mission to save Russia’s economy by boosting the tax revenue the government collects.
In the process, he hopes to break down a centuries-old hatred for the tax collector in Russia and instill the idea that taxes are a social responsibility.
“Somebody has to do it, and it looks like I’m the person,” he said in a recent interview. “In a civilized country, people pay taxes. It’s the cost of civilization.”
Civilizing Russia is a big task, but the new tax czar seems ready for it. A former vice premier, finance minister, member of parliament and banking official who has lived in London and Washington, Fedorov is energetic, forceful, humorous and determined.
In a land where secret police once carted away people in the night, he has instantly become one of Russia’s most powerful officials, with the authority to send people to jail, put them out of business or confiscate their property.
Just getting a phone call from Fedorov can be costly: He scours lists of tax cheats and personally telephones those he knows are wealthy. “All of those with whom I have talked have paid,” he said cheerfully.
But there is one thing slowing him down: his own agency. Fedorov is among the first to acknowledge that Russia’s army of 350,000 underpaid tax collectors is inept, untrained and corrupt.
Most tax inspectors are paid about $100 a month and have little education in financial transactions, he said. The better employees leave for jobs in private business, and those who remain are often easily bribed. Fedorov said he is not optimistic the situation will change any time soon.
The new government of Prime Minister Sergei V. Kiriyenko drafted Fedorov to help cope with a fiscal crisis brought on by plunging oil prices and plummeting investor confidence. The most urgent problem is $25 billion in high-interest loans that will come due over the next year. The Central Bank has only $16 billion in reserves, having already spent billions to prop up the ruble.
Russia is seeking to borrow as much as $15 billion from the International Monetary Fund and other foreign lenders to bolster the reserve fund. But before the IMF lends Russia any more money, it is requiring long-term changes in the way the country does business.
That is where Fedorov comes in. Among its demands, the IMF is insisting on major improvements in the collection of taxes.
For Fedorov, the past four weeks have been show time. He has been one of the most high-profile members of the government, frequently appearing on television and in the press in what appears to be a Western-style public relations campaign.
On taking office, he immediately caused an uproar by pledging to draw up a list of 1,000 wealthy people--dubbed the “Black Thousand"--and to investigate the individuals’ compliance with tax laws. He has taken reporters on tours of Moscow to seek out tax violators, along the way lecturing babushkas selling produce, gas station attendants and minibus drivers about their fiscal responsibilities.
Early on in his tenure, Fedorov telephoned Vladimir V. Zhirinovsky, an ultranationalist member of parliament and head of the ill-named Liberal Democratic Party, and told him to pay taxes he owed. Then Fedorov told the press about it.
Despite his high-profile efforts, some economists say that Fedorov will be lucky to maintain Russia’s poor collection rate at its current level. Cheating is so widespread and the tax laws are so unfair that few people will have reason to come forward and pay more simply because of Fedorov’s campaign, they say.
“Given the tragic 20th century history of our country, it takes more than just five people in handcuffs to make the rest of the country scared, submissive and obedient,” said economist Larisa I. Piyasheva, an advisor to a parliamentary budget committee. “I am amazed to see that people continue to pay taxes at all when the indifference of the state to their problems is so obvious.”
Underlying Fedorov’s efforts is a sense of fairness unusual in the ranks of Russia’s tax collectors. He argues that the tax burden must be spread as widely as possible. Those who cheat on taxes, he says, are depriving retirees of their pensions and workers of their wages. He also has sought to tone down the trademark rudeness of the tax police, who go on routine inspections wearing masks and carrying machine guns.
But it is clear that he would rather be overhauling the tax code and devising new tax policies than collecting the proceeds. Unlike other Russian officials, he sees taxes as a way of shaping social policy and creating incentives for desirable economic activity.
He repeatedly has called for reducing the top income-tax bracket from 35% to 20% and shifting the weight of taxes from businesses to individuals to stimulate growth. So far, the government has agreed only to shave the rate to 30%.
With his big splash, Fedorov has made enemies quickly. His plan to modernize the tax service, use computer technology and merge various departments under his personal control has prompted back-room fighting in the Kremlin.
“A lot of people in the government wait and watch me--and want me to fail,” he said. “Opposition is obviously mounting because people don’t want the tax service to be efficient. That’s clear. There are vested interests in society.”