With New Tax Arrangements, Kremlin Sacrificing Regional Interests but Likely to Hurt Residents of Moscow as Well, 'The Insider' Says

Paul Goble     

            Staunton, Dec. 3 – The new tax arrangements adopted in mid-November are already creating “serious problems for Russia’s regions” because they mean that even more money will flow not to them but to Moscow, a shift that will lead to rising prices in the first instance in remote areas, Berta Shapiro of The Insider portal says.

            That is the latest installment of the Kremlin’s decision to “sacrifice regional development, business, healthcare and education” so as to have enough money for Moscow to continue to fight Putin’s war in Ukraine. But in a twist, this latest move will harm residents of the capital and other megalopolises as well (theins.ru/ekonomika/286985).

            That is because field audits of business and regional payments of the increased VAT taxes will be conducted in Moscow and St. Petersburg not by local tax inspectors but from tax officials who are based in other regions. That will increase the number of inspectors in the capitals and reduce the opportunities businesses and officials there have to bribe them and get lower rates.

            At present, the number of legal entities per tax inspector in Moscow is “hundreds of times as high” as in places like Khanty-Mansiisk. Bring tax inspectors in from the regions will reduce this imbalance and likely include some regional representatives who will be all too glad to punish residents of Moscow and St. Petersburg.

            The new arrangements will mean that Moscow will get more money, the federal subjects less, and the population will pay as prices continue to skyrocket and businesses fail and as regional governments responsible for education and healthcare no longer have the money they need to support these services.