Russian Tax Police Taking Saner Approach To Tax Crime

by Tatiana Smolenskaya, Tax-News.com, Moscow

24 June 2004

Following President Putin’s decision to disband the notorious Tax Police as part of administrative reforms last year, businesses in Russia will be relieved to hear that the government’s tax investigators are now taking a much more level-headed approach to the task of enforcing tax law.

The Tax Police was born in 1993 out of the Chief Department of Tax Investigation, itself created a year earlier. It was charged with cracking down on the more serious corporate and high level tax crimes, though it quickly began to gain a reputation for targeting smaller businesses with increasingly 'paramilitary' methods, giving rise to a popular soap on Russian TV.

However, the enforcement side of the tax police was disbanded last year as the 40,000 strong division was merged into the Interior Ministry, whilst many of its officers, along with their high-powered sniper rifles and other equipment and facilites, were transferred to the narcotics department.

"There is no equivalent department in the Interior Ministry to the Tax Police's physical backup group,” Ilya Kucherov, deputy head of the Interior Ministry's legal department and former senior Tax Police official told the Moscow Times.

“As far as I know, investigators currently manage without direct physical intervention," he added.

One factor which probably hastened the demise of the Tax Police was the growing number of accusations that it was riddled with corruption, and effectively promoted unfair business practices by receiving pay-offs from many businessmen. Some firms were additionally alleged to have used the tax police to nobble their business rivals.

However, the authorities now appear to be taking a much more calm and even-handed approach to the investigation of alleged tax crime.

"Today, law enforcement agencies have not been set fiscal tasks, and we don't have plans for collecting underpaid amounts. This is the job of the Federal Customs Service, the Federal Tax Service and the Finance Ministry,” Kucherov told the Times. “Our job is to detect and prosecute those guilty of tax crimes."

According to Kucherov, the Interior Ministry managed to detect nearly 3,500 tax crimes last year, of which just over 2,200 were classified as major cases. Some 4.5 billion rubles (US$155 million) was collected from successful investigations.

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