Russia To Limit Taxman’s Powers

by Tatiana Smolenskaya, Tax-News.com, Moscow

01 February 2005

The Russian government is mulling a series of legal changes intended to rein in the powers that the country’s tax inspectors enjoy when investigating company tax affairs, the Wall Street Journal has reported.

In an interview with the paper at the World Economic Forum's annual meeting in Davos, Deputy Prime Minister Alexander Zhukov sought to allay fears of growing government intervention in the Russian economy following the Yukos affair, and other highly publicised company tax investigations, by revealing that the government remains committed to its policy of privatisation.

Nevertheless, Zhukov conceded that Russia’s standing in the international investment community has suffered as a result of the tax probes, which have predominantly taken place in the oil sector, but have also been witnessed in other areas of the economy, affecting the country’s second largest mobile telephone company Vimpelcom.

In a bid to regain the trust of foreign investors, the Deputy Prime Minster told the WSJ that government is due to consider changes in the coming weeks that could limit the broad powers used by tax inspectors in back tax investigations.

As a result, their ability to extend probes over long periods, conduct repeat audits and demand large volumes of documents from taxpayers at short notice could be curbed.

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