Russian Tax Amnesty Yields $130m

by Tatiana Smolenskaya, Tax-News.com, Moscow

20 September 2007

A worthwhile 3.22b rubles ($130m) in previously undeclared income has been reported in the first six months of the Russian tax amnesty, reports in the national media have revealed.

In a bid to encourage non-compliant tax payers to regularise their tax affairs and also to boost tax revenues and reverse capital flight from the country, the Russian government brought the amnesty into effect in March of this year.

Under the conditions of the amnesty, those who declare monies to the authorities will avoid prosecution in return for paying income tax at a rate of 13% on previously hidden assets.

Tax experts have warned the government that the scheme may do very little to yield additional revenue, due to uncertainty over the legal standing of those considering declaring unpaid taxes - especially in the case of those already guilty of financial crimes such as money laundering and currency and customs violations.

However, it seems the government has managed to overcome this flaw by barring those convicted of tax evasion and other fiscal crimes from using the service. They have also tempted many tax payers into making declarations by promising that interaction with tax officials will be minimal during the process, as payments are made directly into a special Federal Tax Service bank account.

As yet, however, it remains to be seen how the amnesty has affected the trend towards capital flight.