Putin Aide Signals New Rules For Foreign Investment

by Tatiana Smolenskaya, Tax-News.com, Moscow

17 May 2005

A senior aide to Russian President Vladimir Putin has revealed that the government is set to introduce new rules clearly defining the boundaries for foreign investors following a year of damaging incidents for the country's business climate, typified by the trial of former Yukos chief executive, Mikhail Khodorkovsky.

According to top economic advisor Igor Shuvalov, the new rules would lead to "the softening of bans and formalization of existing restrictions," which are coming in response to Putin's recent call for rules defining strategic sectors where foreign investment would be restricted.

"The main task here is not to delude potential investors but to establish clear and transparent rules of the game," Shuvalov added.

The Kremlin has given a high priority to rebuilding bridges with investors after a series of highly publicised tax investigations into the accounts of firms such as Yukos, TNK-BP and Vimpelcom.

Following a cabinet meeting last month, it emerged that Finance Minister Alexei Kudrin is considering new proposals that would clip the wings of the federal tax service, under which it would be required to consult a more senior body before launching repeat probes into a company's tax history.

Deputy Finance Minister, Sergei Shatalov has also suggested that a commission could be set up that will authorise new tax inspections, which could be under the direct control of Kudrin.

In addition, in draft are proposals which would limit the length of investigations to two months, or three months if the firm under scrutiny has subsidiaries. Under current rules, company tax investigations can legally drag on for many months.

Futhermore, firms may get longer to pay any demands for back taxes, possibly up to one year as against the current six month limit.

Kudrin has been requested to finalise the proposals by the middle of May so that amendments can be presented to parliament before the end of the Spring session.

Meanwhile, the controversy surrounding the arrest and trial of Khodorkovsky on charges of tax evasion and fraud refuse to die down after fresh charges of money laundering were made against the former Yukos boss a mere three days before the trial verdict is due.

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