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Russian Tax Service May Target Tycoons

by Tatiana Smolenskaya,, Moscow

25 September 2007

It has been reported in the Russian media that the country's tax service is in the process of setting up a new unit that will concentrate on examining the tax affairs of Russia's wealthiest individuals, often referred to as oligarchs.

A source told the RIA Novosti news service that a decree establishing the new office within the Federal Tax Service could be signed within the next few days, and will be used for the "check and control of oligarchs".

A small band of Russian investors became billionaires almost overnight on the back of Russia's chaotic and hastily brought-about privatisation programme in the 1990s as they used government connections to snap up state assets at bargain basement prices, particularly in the energy sector. The Russian government under President Vladimir Putin has taken an increasing in the tax affairs of these oligarchs, with the prosecution and imprisonment of former Yukos boss Mikhail Khodorkovsky for tax evasion and fraud in 2004 the most visible example to date. According to the latest Forbes rich list, 52 Russians appear on its list of world billionaires.

However, it is believed that the new national office will not only focus on wealthy business people, but also sportsmen, entertainers, artists and other celebrities with a high profile.

Currently there are ten regional tax directorates charged with examining the affairs of Russia's largest companies, but no such agencies exist to focus exclusively on individual taxpayers.

"There are inspectors who check high-society elsewhere in the world, and the idea of establishing a similar agency here had also been considered," another source told the news service.

The tax service has refused to comment on the reports, although the Interfax news agency revealed that the proposal to set up a wealthy taxpayer inspectorate has long been under discussion by the authorities. An insider told Interfax, however, that there are no plans to establish such a unit in the near future.

The Moscow Times also reported that the creation of a new inspection office would also mean that the Finance Ministry's regulations on registration of the biggest taxpayers would have to be amended.

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