Russian Banks Will No Longer Report Transfers To The Tax Office

by Tatiana Smolenska, Tax-News.com, Moscow

31 July 2003

Before the Russian Government stumbled on the simple expedient of reducing taxes in order to collect more of them, it played with a number of cute schemes to squeeze more loot out of recalcitrant tax-payers. One of them bit the dust this week when Vladimir Putin cancelled a decree dating from Boris Yeltsin's era which required the banks to report any movement of more than US$10,000 to the tax authorities, on the (no doubt correct) assumption that anyone with that much money to move around had untaxed income that would be worth finding out about.

Russian banks and their customers didn't take long to work out that it was possible to move US$100,000 in ten lumps of 10,000, and the system never worked. The decree has been cancelled on the grounds that it is unconstitutional and unlawful. A 1990 law governing the operations of banks established a statutory duty of confidentiality, which can be broken only with the Court's permission and in a limited number of other situations.

However, a replacement decree issued under money-laundering laws will require the banks to inform the Ministry of Finance's 'Committee On Financial Monitoring' about any transactions involving more than 600,000 roubles - about US$20,000.

Expect lots of accounts holding US$19,990 now instead of US$9,990. At least transaction cost has been halved - a kind of progress!

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