Tax Investigations May Slow Growth, Warns Russian Minister

by Tatiana Smolenskaya, Tax-News.com, Moscow

13 December 2004

Andrei Sharonov, Russian deputy Economy Minister, has warned that the Russian economy may lose out if the government continues to pursue its aggressive line on tax evasion, as many foreign firms will be deterred from making investments.

Speaking in the wake of the controversy surrounding the $158 million claim for back taxes imposed on Russia’s second largest mobile telecommunications firms VimpelCom, Sharonov told reporters that lower levels of investment may slow economic growth by between 3% and 4% next year.

“Everyone is expecting that they or their partners, neighbours or competitors will be named,” Sharonov remarked.

“This is not a creative atmosphere that stimulates investment. Everyone is thinking how to save and hide money,” he observed, according to Bloomberg.

The Economy Ministry is forecasting economic growth of 5.8% for Russia next year, provided the recent slew of tax claims, which have targeted firms such as Yukos and BP’s Russian unit, TNK, does not deter future investment.

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