Might Russia Restore the Inheritance Taxes on Oligarchs Putin Eliminated in 2005?

Paul Goble

            Staunton, May 26 – A major reason that inequality in wealth among Russians is likely to continue and even expand in the coming generations is that the country has not had an inheritance tax of any kind since Vladimir Putin did away with the post-Soviet laws imposing such levies in 2005.

            Some Russians are worried about the consequences of this and cite Winston Churchill’s comment that inheritance taxes “prevent the formation of wealthy slackers;” but most Moscow commentators doubt that Putin would agree to a step that would be so unpopular with those who are his most committed supporters (svpressa.ru/economy/article/201035/).

            Vladimir Starinsky, a prominent Moscow attorney, explains that “in Russia there in fact are no taxes on inherited property: it was eliminated by Federal Law No. 78-FZ of July 1, 2005.” The only exceptions are honoraria paid to the heirs of writers or to the heirs of those who secured a patent for an invention.

            Vasily Koltashev, the head of the Moscow Center for Political Economic Research, tells Sergey Aksyonov of Svobodnaya pressa that in his opinion “a tax on inheritance is of course necessary, at least on large estates.  And it should be [in that case] a large tax.” But he expresses real doubts that the current Russian government will back the idea.

            Given that finance minister Anton Siluanov has declared that the country’s tax system won’t change over the next six years, there would seem to be little chance, Koltashev says, given that “our political system is so constructed” that Siluanov as a minister is “higher than the deputies” of the parliament.

            That could be changed only if there were demands from the population at large that some members of the Duma would be prepared to introduce even in the face of near certain government opposition and then to work to change votes on such a measure on a second or a third occasion.

            Russians must recognize that property is no inviolable but is held only with the permission of other citizens acting through their governing institutions, Koltashev continues.

            Vera Ganza, a member of the Duma’s budget and taxation committee, said that the issue of re-introducing inheritance taxes especially on the wealthiest Russians is intertwined with questions about revising privatization, something she says that are frequently being raised in her committee and elsewhere.

                Aksyonov of Svobodnaya pressa points out that “a tax on large estates could be one of the means” to revise privatization, especially if it were set at “a third, a half or even 80 percent” of the billions that some of the oligarchs have in their possession to leave to their heirs.

            “We need justice,” Ganza says, “and the first step we must make is not to wait but to introduce new a just income tax.” If the oligarchs have to pay a significant income tax, that would be “very just.”  And it might lead to the restoration of an inheritance tax as well. Moreover, she dismisses Siluanov’s statement that there will not be any change. 

            Taxes are going to go up for ordinary people, she says, “because out government has only two sources of income for the budget – income from oil and the pockets of our citizens. There is a third source – the oligarchs – but there is a taboo on this: no one will touch them,” at least not at present.