July 22, 1997   

This Date's Issues:   1075  •1076 •1077  1078

Johnson's Russia List [list two]
#1075
23 July 1997
djohnson@cdi.org

[Note from David Johnson:
1. Nezavisimoye Voyennoye Obozreniye: "Safety of Nuclear Weapons: 
It Can Be Ensured Not by Partial Measures, But by Fulfilling a 
Comprehensive Program."
2. Rossiyskaya Gazeta: Tax Service Chief Pochinok Interviewed.
3. Rossiyskiye Vesti: Statute on President's Representatives Eyed.]

********

Problems in Ensuring Safety of Nuclear Weapons Examined 

Nezavisimoye Voyennoye Obozreniye, No. 24
July 5-11, 1997
[translation for personal use only]
Article by Colonel Vladimir Ivanovich Dumenko, doctor
of technical sciences, chief of Military-Scientific Group of Military
Academy imeni F. E. Dzerzhinskiy, and Yevgeniy Mikhaylovich Suskevich,
candidate of technical sciences, under rubric "Expert Opinion":
"Safety of Nuclear Weapons: It Can Be Ensured Not by Partial Measures,
But by Fulfilling a Comprehensive Program"

Ensuring safety in the development, production and operation
of nuclear installations for military and civilian purposes is one
of the most acute problems in the overall set of missions of ensuring
Russian Federation [RF] national security.
The urgency of the problem of ensuring the safety of nuclear
weapons is dictated by a number of objective reasons:
a change in views on international cooperation,
the birth of the deterrence concept, and the need to prevent possible
aggression by any state objectively led to an increased role of
strategic nuclear forces. This circumstance indicates that in the
foreseeable future nuclear weapons will be preserved in all countries
possessing them, and their further proliferation is not precluded;
the realistic approaches to the problem of war and peace which
began to predominate in recent years assuredly led to a decline
in the threat of nuclear war. Meanwhile, a comprehensive analysis
of processes connected with geopolitical aspects of the problem
of strategic stability shows that positive factors in the development
of relations among countries of different orientation do not exclude
the danger of war or of individual military conflicts, and the latter
can take on the most unexpected character at any moment. All this
permits expressing doubts as to the present possibility of a substantial
decline in the level of danger of possible use of nuclear weapons
or of the effect of conventional weapons on them;
the decision to expand the NATO bloc eastward is a direct threat
to Russia"s national security. With all the diversity of
approaches to this problem, the conclusion is unquestionable: the
real reason for the expansion is that the Alliance is striving to
give a prowestern direction to processes in Central and Eastern
European countries, to hinder integration processes (above all of
Russia), and to strengthen the U.S. position with western countries.
The fact that a resolution of these issues is linked in the closest
way with the proliferation of nuclear weapons among new NATO members
or with stationing on their territory also generates no doubt in
us. The latter circumstances naturally will require Russia to take
adequate steps, such as at least the redeployment of strategic nuclear
forces to territory of the Federation"s Western region;
instability of military-political relations within the CIS framework;
the possibility of a disintegration of the Union of states and of
the appearance of territorial, legal and other issues will lead
to an expanded base of military conflicts on former USSR territory,
conflicts that are unpredictable in terms of duration and consequences.
The possibility of nuclear blackmail through the seizure of nuclear
installations by criminals is not precluded here.

Substantial changes have occurred in the geopolitical situation
of Russia, a member of the "nuclear club" and possessor of a significant
nuclear weapons arsenal: the transition from a system of relations
of a bipolar world to multipolar relations, peace initiatives on
the part of a number of states, and agreements responding to them
on international security problems unfortunately did not contribute
to stabilization of the international situation to a proper extent.
And problems of global assurance of nuclear and ecologic safety
now are coming to the foreground in these relations. An analysis
shows that at present there are no other factors except for those
indicated which would be given the very same priority in an assessment
of interests of various countries. This has to go for the Russian
Federation as well to the full extent.
An analysis of terms of fulfilling the START II Treaty from
the standpoint of ensuring nuclear safety with consideration of
the present situation of the Russian Federation indicates the appearance
of a number of new problems, dictated, first of all, by the need
to operate missile complexes with expired or extended warranty service
life; secondly, by the increased proportion of mobile missile complexes
because of a significant reduction in the number of silo launchers;
and thirdly, by the need to recycle a significant quantity of nuclear
munitions (YaBP). Moreover, the START II Treaty, just like other
nuclear arms reduction documents, does not register matters of a
balance of interests, the parties" mutually advantageous
cooperation, and assurance of nuclear, radiation, technological,
ecologic and other kinds of safety.
In parallel with the performance of tasks set by the START
II Treaty (1993-2003), work must be fulfilled under the START I
Treaty and on unilateral commitments for the destruction of tactical
nuclear weapons.
The overall quantity of components of nuclear weapons and
equipment subject to destruction (recycling) consists of over 22,000
nuclear munitions, 60 tonnes of weapons-grade plutonium, 7,500 ballistic
missiles, 300 submarine nuclear reactors, and 10 military-industrial
reactors for producing fissionable materials for nuclear munitions.
Accomplishing these tasks requires the creation of ecologically
clean and safe technologies for recycling nuclear weapons and power
plants. But even the RF Laws "On Defense" (1996) and "On Security"
(1992) do not examine questions of a comprehensive solution to problems
of safety in all stages of the life cycle of weapons and military
equipment, including questions of recycling.
An analysis of the status of the Armed Forces [and] of
scientific-production,
credit-financial, and foreign economic spheres in the Russian Federation
permits drawing the conclusion about a deep crisis in the country"s
military economy. At present the crisis has assumed such a scale
that even the very foundations for ensuring Russia"s military
security have turned out to be undermined. Its consequences will
spread not only to the near term, but also to the more distant future.
The preservation of negative tendencies in RF Government military-economic
activity, along with other destructive tendencies that exist in
the country"s socioeconomic life, inevitably will aggravate
the problem of ensuring the safety of nuclear weapons.
We are seeing a transformation of organized crime into an
antisocial system under conditions of a growth of sociopolitical
instability and a weakening of the role of state structures in the
country. Attempts to take possession both of nuclear weapons as
well as their basic components are possible under certain conditions
to ensure a leading position on the part of this structure. In addition,
there continues to be a pressing threat of terrorist seizure of
nuclear installations, with the advancement of various political
and financial demands.
A trend presently is observed in Russia of an increasing number
of industrial and transportation accidents, the basic causes of
which are a deterioration of capital assets of the nuclear, chemical,
petrochemical and oil refining industry. There also is a growing
probability of dangerous external effects on nuclear weapons and
nuclear power plants because of an expansion of the network of potentially
dangerous energy-intensive economic installations at their locations
and also a decline in responsibility of state bodies and the personnel
of these installations for their accident-free operation.
The accumulation of significant stockpiles of weapons-grade
and energy-grade plutonium occupies a special place in the set of
reasons dictating the growing urgency of ensuring the safety of
nuclear weapons. Fulfillment of the START I and II Treaties will
lead to a freeing-up by the contracting parties of up to 100 tonnes
of weapons-grade plutonium. Its critical mass equals only 7 kg and
it takes 3-4 kg of weapons-grade plutonium to create one nuclear
munition. Around 550 tonnes of energy-grade plutonium have been
accumulated in the planet"s nuclear reactors. Plutonium
is a very dangerous fissionable material: even an insignificant
quantity is capable of causing a lethal outcome when a person is
exposed to it.
The Russian Federation accounts for a large portion of all
plutonium produced. There is enough of it to poison the entire population
of the globe many times over.
Plutonium is a creation of human hands; once created, however,
it remains in nature for hundreds of thousands of years. Costs of
recycling it when nuclear weapons are destroyed are extraordinarily
high. A wide range of scientific, technical, economic, ecologic,
social and even political tasks must be accomplished here. In our
opinion, its safe use, cessation of production, and destruction
of stockpiles must be elevated to the level of tasks of nationwide
importance.
Studies of the RF geopolitical, military-economic and sociopolitical
situation as well as of a number of military-technical matters permitted
determining the following basic problems of ensuring the safety
of nuclear weapons.
In the Sphere of Geopolitics:
1. Following a firm state domestic and foreign policy that
precludes separatism and intervention in RF internal affairs;
2. Strictly fulfilling treaties previously concluded with
CIS states on whose territory nuclear weapons still remained about
their elimination or recycling;
3. Creating an international system for ensuring nuclear safety,
including protection against nuclear terrorism;
4. Building up and strengthening RF state borders and customs
service with all CIS states;
5. Ensuring [RF] independence in the development, production
and operation of nuclear weapons and all their supporting systems
from states which previously were part of the USSR and now are independent.
In the Organizational-Technical Sphere:
1. Developing a state strategy for ensuring nuclear safety;
2. Forming federal special-purpose programs for ensuring the
safety of nuclear weapons;
3. Drawing up proposals for forming "zones of responsibility"
among branches of the Armed Forces and other departments possessing
nuclear weapons;
4. Creating a system for monitoring the status of safety;
5. Redeploying RF Ministry of Defense groupings with nuclear
weapons into interior areas of RF territory to safe distances from
the country"s western and southern borders and with consideration
of the criminogenic situation and ethnic makeup of the population
in proposed stationing locations;
6. Advance planning of a system of measures for ensuring nuclear
safety with the possible restationing of formations and units from
the Western TVD [theater of military operations] when there is a
complication of the situation and in the course of combat operations
using conventional weapons;
7. Forecasting possible variations of the effect of terrorist
groups and other force elements on nuclear installations and developing
a system of measures for countering them and for ensuring the safety
of these installations;
8. Creating mobile forces in the Russian Federation to protect
installations with nuclear weapons and AZU [not further expanded]
against terrorist groupings and enemy DRG [raiding and reconnaissance
parties];
9. Upgrading the system and technical equipment for security
and defense of servicing areas and launching areas of combat-employment
units, bases, arsenals and other installations with nuclear weapons
to ensure the safety both of weapons themselves as well as of the
personnel;
10. Upgrading the system for mopping up in the aftermath of
nuclear weapon accidents and substantiating the structure and algorithms
of coordination of emergency-response [avariynyy] units of various
ministries and departments;
11. Based on new technologies, upgrading methodologies for
diagnostic testing of nuclear weapon complexes that are in an emergency
state;
12. Assessing [pasportizatsiya] RF territory from the standpoint
of solving problems of ensuring the safety of nuclear weapons;
13. Establishing situation centers for command and control
in crisis situations involving nuclear weapons and the methodology
for using them as alternate command posts.
In the Economic Sphere:
1. Substantiating necessary logistic and financial resources
for ensuring the requisite level of nuclear safety;
2. Categorizing nuclear installations in terms of the degree
of priority of providing material and technical means for maintaining
the requisite level of nuclear safety;
3. Providing direct financing of all kinds of work to upgrade
and further develop measures for ensuring the safety of nuclear
weapons, and singling out financing of the safe operation of nuclear
weapons as a separate item;
4. Preventing a total collapse of practical science activity
in the area of nuclear technologies and of developments of new models
of missile-nuclear weapons (basically through state investment,
reorganization, singling out of priorities and so on);
5. Preventing the intervention of private commercial structures
as well as of a regional political elite in matters of financing,
scientific-production activity, and operation of nuclear weapons;
6. Strict control by state agencies over the process of selling
written-off arms and military property in order to prevent a leak
of information about the design and operating conditions of nuclear
weapons.
In the Sociopolitical Sphere:
1. Forming a system of demands on personnel who support the
development, production and recycling of nuclear weapons and on
personnel who operate them and are responsible for implementing
measures to ensure the nuclear safety of nuclear weapons;
2. Legislatively incorporating rules for accepting mentally
and physically sound, morally stable people with no criminal past
for work in corresponding establishments and enterprises, and rules
for the call-up for military service in the Nuclear-Technical Troops;
3. Creating good everyday-social conditions in the Nuclear-Technical
Troops and creating conditions under which it is impossible to have
a leak of secret information about nuclear weapons and technologies
and about their safe operation to sabotage and terrorism;
4. Thoroughly planning measures for transporting, loading
and storing nuclear munitions with consideration of data on the
situation, weather and other conditions in the work area. The goal
first and foremost is to preclude provocative actions on the part
of the local population, public organizations, criminal structures,
and terrorist and nationalist groupings. Such measures assume special
significance in periods when a state of emergency or martial law
are introduced.
An analysis shows that there are a significant number of top-priority
problems in ensuring the requisite level of RF nuclear safety in
the military area.

*********

Tax Service Chief Pochinok Interviewed 

Rossiyskaya Gazeta
July 17, 1997
[translation for personal use only]
Interview with Aleksandr Pochinok, leader of the Russian Federation
State Tax Service, by Aleksey Podymov; date and place not given: "Be
Honest, Pay Your Taxes. You'll Sleep Better"

[Podymov] What is the extent of the black economy in Russia today? 
Can it be said to pose a threat to our national security?
[Pochinok] I believe the level of the black economy is lower than
many people think. The overwhelming proportion of money turnover is legal.
What is the black economy? It is money that bypasses tax organs.
Recently, to my mind, the amounts involved have been falling sharply. It
is another matter that certain enterprises are trying to devise plans to
reduce or dodge taxes because rates are too high. But that is not the black
economy.
Let me explain. The State Tax Service has started working in a
fundamentally new way with major defaulters. We used to ask the leaders of
certain companies why they were not paying their taxes. But that was
pointless because, as a rule, such companies would be making a loss. There
is a group of middlemen who sell their products, there are banks that lend
to them -- that was where the profits were going. Then they flow to
wherever taxes are lower. These companies can be registered in the Bahamas
or in Ingushetia. Which, thank God, is no longer a free economic zone.
[Podymov] Clearly outright victory over the black economy can only be
won when it is worthwhile to operate legally. Just what needs to be done?
[Pochinok] Let us start with small businesses. We are applying a
very tough taxation system in respect of these businesses. A small
enterprise with two or three workers has to fill in 40 reporting forms and
pay a lot of taxes. It is very easy to get confused. The law on
simplifying the system has also had virtually no impact.
For many people small businesses are just a way to evade tax. For
instance, there is a huge oil refinery. It sets up a network of small
enterprises -- perhaps without even organizing corporate status for them. 
The general director, his son, and three invalids
-- that is all that is required to receive tax breaks. These firms
have a huge sphere of activity -- from ice cream production to oil
extraction.
Today it seems to be simply essential to calculate taxes on the basis
of income from basic operations. And tax inspectors will visit
entrepreneurs merely to see for themselves that they are not doing anything
other than what they had declared.
Racketeers do not approach those who have no unreported money. The
mafia has long since calculated entrepreneurs' potential revenue and
collects one kind of tax as a precise percentage of what people earn. 
Without any institutions, officials, or tax inspectors. They work it out
and collect it.
We are proposing an original approach -- to make illegal earnings
taxable. If it can be proved that people have illegal earnings, let them
be taxed.
That will be far more frightening than any punishment. The amounts
that people would have to pay in that event would be truly enormous. You
collect income that has been concealed from tax plus a fine of twice or
three times that amount, plus the tax itself. As a result, we will be
applying a more frightening punishment than the Criminal Code.
[Podymov] Why do tax officials insist so much on abolishing tax
exemptions?
[Pochinok] The abolition of tax exemptions immediately removes a huge
slice from the criminal world. Do you know what the losses of personnel
have been in organizations that received tax exemptions on alcohol and
tobacco? These have now been abolished, and the level of crime has been
reduced. We are striving above all to really reduce budget expenditure. 
Paradoxically, in order to pay money on time we need to cut spending. In
order to create a balanced system, we must cut federal budget expenditure
by around one-fourth. That is why the question of military reform and
reform of the state apparatus has been raised so acutely. This is being
done in order to reduce the budget. But we need more than just a
mechanical reduction.
This year the Finance Ministry will be implementing a new system of
budget formation. And Chubays was the first to propose it. What is it?
Budgets used to be drawn up on the basis of departments' spending
applications. Naturally, they would submit overstated applications that
would then be cut back.
Today the approach is different. First we start with revenue, plus
the deficit, of course. The amount the state actually has is then divided
up between ministries and departments. In other words, we are working
backward. It is an entirely normal policy accepted everywhere.
Why does no minister today have much of a desire to cut the number of
his officials? It is very simple. If you cut people, all your normatives
will be cut back and you will lose money. It is easier to keep on 10
people on small salaries than one person on a big salary. But under our
scheme the amounts of money will be prescribed -- you will not get any
more, but it will not be taken away either.
[Podymov] There is another problem. There are very many offset
arrangements in this country. There is little hard cash around. But you
cannot use offsets when it comes to paying wages and pensions. This means
that the budget's cash revenue needs to be increased. How will this be
done?
[Pochinok] Before carpeting the leaders of the largest defaulting
enterprises, we collected material on their debts, accounts, and tax
evasion schemes. As a result, enterprises discovered that they were able
to pay a certain amount. The leaders were given the following options. 
Either they pay up and clear their debts to the budget, or they go
bankrupt, or decree No. 254 on the restructuring of debts would be
implemented, transferring the controlling block of shares -- if they had
not covered their current payments for two months, the controlling stake
would be sold.
Each of them had the right to choose. For instance, AvtoVAZ opted for
surrendering the controlling stake. And it is now meeting its current
payments. Over the past month it has properly paid its 250 billion rubles
[R] and settled up with the oblast, the city, and the Pension Fund.
Sibneft, for instance, decided to issue shares, and will use them to
pay off all its debts by 15 September. Yukos is issuing bonds and
increasing its current payments.
Gazprom preferred to simply pay up in full. Although, just in case,
we gave the order to sequester [arestovat] the property of all its
"transgaz" operations. But, fortunately, that proved unnecessary. Lukoil
too has established a regular payment schedule.
Now virtually all of these 14 enterprises are producing real amounts
of revenue. But as soon as any of them misses a payment we will apply
repressive measures.
We are also dealing with the YeES Rossii Russian Joint-Stock Company. 
The situation there is not entirely favorable, to put it mildly. It turns
out that the YeES Rossii Russian Joint-Stock Company is considerably
"poorer" than had been thought. Unfortunately, it is surrounded by a
network of intermediary firms large and small, and huge amounts of money
have been lost to the state.
The new YeES Rossii Russian Joint-Stock Company leadership seems to be
just as interested as the tax department in taking serious steps to
retrieve its losses and to provide unified accounts for its monetary flows.
[Podymov] The Tax Service is traditionally accused of two things. 
The first is of stealing workers' pay by collecting taxes and the second is
of bankrupting enterprises and throwing tens of thousands of people out
onto the street.
[Pochinok] First, let me mention the sequence of payments that has
now been introduced in Russia. The Tax Service comes fourth. We come after
wages and payments to the Pension Fund -- that is, we do not steal people's
wages, we come later.
Second, I have not seen any enterprises shut down as a result of
bankruptcies. Bankruptcy or the use of decree No. 254 primarily means
changing the owners and the management. The workers continue to be paid. 
The boss and the managers who are incapable of paying wages and taxes must
go.
The recent case involving Nizhnevartovskneftegaz was the same old
story -- as deputies said, nobody wanted to close down the company and
throw 250,000 people onto the streets. There was no question of ending oil
production. One simple obligation was written into the terms of the tender
for the Tyumen Oil Company -- whoever won would repay its well known debts
of more than R1 trillion. And if they were not repaid, in the space of two
months we will retrieve the controlling stake and resell it until we find
someone who will pay.
[Podymov] In the first six months of the year Gazprom obtained only 6
percent of its profits in hard cash, whereas it is having to pay 65 percent
of its taxes in cash. At the YeES Rossii Russian Joint-Stock Company 45
percent of taxes have to be paid in cash, even though just 4.7 percent of
its profits are in this form. You are planning to move by the end of the
year to a system whereby 100 percent of taxes are paid in cash only. After
all, Vyakhirev will never find another R14 trillion. Please tell us how
taxes are supposed to be paid when there are no profits?
[Pochinok] You do not think much of Vyakhirev if you reckon he has
paid all he is going to.
[Podymov] But almost $3 billion is not something you can find every
day.
[Pochinok] No it is not, but the fact is that certain subunits of
these companies are receiving hard cash while the extracting companies
themselves are not.
Everyone is perfectly well aware that revenue is concentrated either
among the traders or with such a company's bank. Gazprom receives just 3
percent in hard cash. Whereas traders receive hard cash for oil, gas, and
for their services. There is quite a lot of hard cash revenue -- and in
dollars -- within the system. It was no accident that Gazprom is doing a
very important and necessary thing
-- it is establishing two centers for concentrating revenue. It no
longer plans to pay through individual subunits. A powerful center
focusing on pumping transactions, and a powerful center focusing on sales
transactions are emerging. And monetary flows pass through them.
Vyakhirev is concentrating the monetary flows on the two centers so as
to be able to settle up. And the volume of monetary revenues has
immediately increased sharply.
I am not saying that it will be possible to rapidly solve the problem
of the lack of hard cash. But lately the volumes of emission by the
Central Bank have been quite respectable -- and these are legal emissions
in line with the Central Bank's normal balance sheet and the volume of
financial flows. The amount of money in circulation is increasing, money
is leaving the short-term state bond market. Yields in that market have
fallen, and the level of borrowings by the state has declined.
Whereas last year there was R160 trillion in the short-term state bond
market and we borrowed at 100 percent (and consequently had to pay R160
trillion), now we have borrowed more than R300 trillion, but at just over
20 percent, and we will have to pay out just R60-70 trillion.
[Podymov] What is the situation as regards individual taxation?
[Pochinok] More favorable. The campaign to submit returns went very
well purely formally. Some 3.3 million returns have already been
processed. There will be slightly fewer to go to the year's end. That is
indeed a great deal.
We ought seemingly to be pleased. But the waiting lines that we have
experienced, the lack of forms, the lack of instructions, the unhappy
people, the telephone calls, the complaints -- all that is bad. People who
are prepared to pay their taxes properly should not have any problems!
[Podymov] Is the legitimacy of high incomes being checked?
[Pochinok] We are checking the existence of taxable income and we can
guarantee that an income is legal and that tax is paid on it. The rest is
not our department's problem.
For instance, a variety star earned big royalties, she pays a
correspondingly large amount of tax; we check the existence of the royalty
and the fact that tax has been paid. We are responsible for that.
Of interest in this connection is the reaction to Sergey Almazov's
statement that certain representatives of the arts world are not very good
at paying their taxes. Some of them issued statements that they have not
paid and will not be paying. But subsequently many of them paid up
nonetheless. We do not want to shame well known people, we at least try to
give people a chance to obey the law.
[Podymov] How about casino winnings -- are they legitimate income?
[Pochinok] Of course they are. That is actually a very important
question. We now have taxable and nontaxable incomes. Even bank interest
is not taxable nowadays. We have brought in certain restrictions this
year.
As of next year and the introduction of the Tax Code we will be able
to tax all kinds of incomes.
[Podymov] People recently started filling in their returns. But
people as yet have no real financial history. Nonetheless, certain draft
laws require people to report their incomes for their entire previous lives
if they make expensive purchases. [Pochinok] That is precisely why I do
not like the previous drafts of the law "On Opposing the Legalization of
Illegal Income." It will be having its second reading in the Duma.
With the introduction of the Tax Code we will obviously be able to ask
permission to declare an amnesty. That is necessary. For individuals.
In other words, we will be announcing: "Bring in your money. Show it
to us. Put it in accounts in our banks. We will not apply any sanctions."
[Podymov] What about taxes?
[Pochinok] First make a declaration, and then by all means pay on the
income you will receive afterward.
Moreover, I think that in the future we will need to switch to family
returns. That is a fairer system.
[Podymov] You are talking about the problems of the rich but in our
country benefits for socially unprotected groups are now being very sharply
cut back. And there is the question of society engaging in more charitable
work to ensure that more aid flows from the rich to the impoverished.
[Pochinok] In this instance we are talking about tax exemptions for
charity. Understandably, there are some entirely justifiable fears.
First, not a single benefit for socially unprotected groups has as yet
been abolished. Not one.
Second, we are a country with uniquely ramified benefits enjoyed by
all and sundry. Not so long ago there were 70,000 people traveling free on
public transport in St. Petersburg -- now there are 1.5 million.
Everyone with a certain number of children in this country gets
benefits. Even if one person's children are personally chauffeured to
school in a Rolls-Royce while another person has problems getting a slice
of bread.
Benefits should be focused on those who really need them!
It is very important that the Tax Code states: "Benefits should be
issued not on the basis of categories, but on the basis of type of
activity." If benefits are issued on the basis of categories, then there
will be lots of public charitable foundations -- for the disabled,
Chernobyl survivors, Afghan veterans, and so forth. If you are
nonprofitmaking organizations then you will enjoy the same benefits as you
do today. But as soon as you make a profit -- sorry, you will have to be
taxed.
[Podymov] There are lots of instructions which are often placed above
laws. For instance taxpayers themselves have to make sure that the money
reaches the Tax Service's account. You will recall that several banks
failed 18 months ago. But why should clients who used those banks to
handle their money end up in default?
[Pochinok] When the banks failed do you know how many people turned
up wanting to pay their taxes through them?
It is no accident that in the new Tax Code we want to avoid
instructions that interpret the law at all. Now for the first time we are
not waiting for a law to be published but, on the contrary, we are trying
between the first and second readings to insert our instructions and
instructional material into the Tax Code text so as to ensure that
everything is in the same law. Following the Tax Code's appearance we will
have no right to interpret the law.
For instance, the Comptroller's Office did some checks and stated that
we had damaged the state to the tune of R4 trillion. How? First by not
sequestering and selling off AvtoVAZ property, and second by not
sequestering and selling off the Moscow Subway. Theoretically, tax
officials should have done this. But what would have happened in Moscow if
we had indeed done so and sold off the subway?
[Podymov] On 9 July we at Rossiyskaya Gazeta published the ruling by
the Constitutional Court for Moscow Oblast on the abolition of the
so-called infrastructure development levy.
[Pochinok] You see, airport levies have been abolished virtually
everywhere, yet now some "authority" [sirena] had brought in something
similar in Moscow Oblast. We are now investigating just what it was and
where it came from. Although in principle that is the prosecutor's job
rather than ours.
You must understand that people not only have to pay more but, above
all, we must not make it possible for decisions to be made that are liable
to lead to bribery. We need to clear away any grounds for corruption.
Here is an example. Does anyone know of even one apartment in Moscow
that has been valued in line with market value? No, the Technical
Inventory Bureau values things any which way.
What are we proposing? That a tax on real estate be introduced
instead of a tax on property and a tax on land. What did they do in
Novgorod? They valued hundreds of thousands of plots, calculated their
market value, drew up a full cadastre, and can now calmly introduce a real
estate tax.
Yes, this will take a huge amount of work. But the whole country
needs to be measured and revalued! Would you ask how many entirely
incomprehensible projects that had sprung up literally out of nothing were
uncovered in Novgorod and Tver? The houses on the Rublevskoye and Minskoye
Highways have simply not been taken into account by the Technical Inventory
Bureau. There are only unfinished construction projects there and nothing
to tax.
We will have to bring in restrictions -- after a certain number of
years following the start of construction everything will have to be
registered and valued compulsorily.
With our legal nihilism many people have gone to Spain and Cyprus to
buy real estate and thought that it would not cost them anything. Now they
have learned the bitter truth. They have suddenly discovered that those
places do have a real estate tax, and these people, as is usual for
Russians, had been forgetting to pay it.
The EU has introduced a system of full notification of the nonpayment
of taxes in all community countries. If you fail to pay even a small
amount in any of these countries you will not be given a visa to travel
anywhere in Europe, and everyone will know that you are a tax defaulter. 
And we will be joining this system. With all the ensuing consequences.
[Podymov] What is the current situation with taxes over the first six
months?
[Pochinok] In the first six months we have collected advance payments
of R69 trillion in hard cash and, taking account of offsets, we have
collected R120 trillion. On average we have reached the 85-percent level
taking account of offsets, and we have met more than one-half of the budget
in hard cash. Last month we fulfilled our plan. Now the entire problem is
to replenish the budget with normal cash.
If we make every effort, then I would emphasize that we will fulfill
the sequestered budget -- but only the sequestered budget. The old
R100-trillion hole is still empty, and there is absolutely no way of
filling it in. There are limits to every possibility. You cannot get more
wool from a sheep than it can grow!
[Podymov] People who hold posts such as yours are always interesting.
You have spent a good time in the Duma [1993-April 1997], everyone knew
you. What does this new position mean to you? Are you the kind of
patriotic statesman who aims to achieve feats for the people's sake? Or
are you in it for the money or for reasons of ambition? Tax collection was
a totally hopeless undertaking, are you going to turn it into a hopeful
one?
[Pochinok] The job, of course, is not a matter of money -- my pay is
currently R2 million. I hope that under the new edict it will be just over
R5 million.
There is a pinch of ambition, of course, but only a pinch. The most
important thing is that now there is a chance to make the financial system
normal.
I am perfectly well aware that you will not earn any popularity or win
any awards in this position -- that is natural. In any country the tax
service is not particularly loved, since it takes people's money away. If
the budget is short of money they get the tax service on the job!
We are in bad shape [my krayniye], but we now have a chance to restore
some order. Ultimately, after all, it is nicer to live in a country where
everything as regards tax is understandable and simple.
[Podymov] Not so long ago you promised to fire the oblast
administration chief who collected the least tax. Whose name is on the
order?
[Pochinok] The order has not been drawn up yet. This report was
about encouraging the best and punishing the worst. There are 11
candidates for encouragement. On the other hand, there is a group
comprising the worst performers. There are 11 territories. Unfortunately,
one of the leaders will have to go. Taymyr has a very good chance, things
are very bad in Chukotka, in Ivanovo and Omsk Oblasts, in North Ossetia,
the Koryak Autonomous Okrug, and in a few other regions. We will be
objectively selecting the worst performer from among those.

********

Statute on President's Representatives Eyed 

Rossiyskiye Vesti 
July 15, 1997
[translation for personal use only]
Report by Lyubov Tsukanova on statement by Anton Fedorov, chief of the
Russian Federation President's Administration for Coordinating the
Activities of the Head of State's Plenipotentiary Representatives in the
Russian Federation Regions: "'Sovereign's Eyes' Will Be Sharp. President
Reinforces Institution of His Regional Representatives"

Boris Yeltsin issued an edict 9 July ratifying the new Statute on the
Russian Federation President's Plenipotentiary Representatives in the
Russian Federation Regions. The current statute, the fourth since the
institution of the representative was created, develops the ideas expressed
in the president's 1997 message on expanding the role of the head of
state's regional representatives with a view to more effectively protecting
general state interests throughout the country's territory, guaranteeing a
single legal area, and pursuing a "single policy in spheres assigned to the
Russian Federation's control."
Anton Fedorov, chief of the Russian Federation President's
Administration for Coordinating the Activities of the Head of State's
Plenipotentiary Representatives in the Russian Federation Regions, comments
on the new tasks of the "sovereign's men" in the regions for Rossiyskiye
Vesti.
The new statute really does not differ so radically from the previous
one. But although its has few new elements, their significance is great
and they are designed to provide a more clear- cut differentiation of
powers at the regional level, separating local tasks and responsibilities
from federal ones. We have been following this route for a long time, but
I would say that so far we have not done so consistently which has allowed
both sides to act fairly freely. But inasmuch as Moscow is far away, it
has been the honorable governors who have more often taken the opportunity
to interfere in others' powers.
According to the present edict, there are three new features of the
activities of the president's plenipotentiary representatives. First, there
is the monitoring of federal cadres in the regions. Today, Federation
components contain up to 90 territorial subdivisions of federal structures.
They encompass people who are appointed by the center by agreement with
the local authorities. It is wrong to say that they are completely
"unsupervised" at present: The relevant federal departments give them some
methodological support and, generally speaking, set them tasks related to
the specific functions they perform. In the regions these people are, as a
rule, under the influence of the local organs of power -- both as a result
of banal everyday concerns (housing, other facilities, personal
relationships, and so on), and the local authorities' natural desire to
broaden their influence. This, I repeat, is understandable and natural but
it should be regulated.
The second task is to monitor federal resources, primarily federal
budget funds which are sent to the regions where they are often, though I
must say not always, misappropriated. The third feature concerns the
cooperation of the president's representatives with the federal structures
in the regions. The promulgation of this document means that Federation
components or regions will acquire an official who will directly coordinate
the activities of territorial structures of the federal organs of power. 
Previously this was one of the many functions of the president's
representatives, but it is now strictly designated as their permanent duty.
The president's representative will not be in charge of all these
structures -- this is not his job, but he will endeavor to convey to them
the state's wishes, so that all the territorial organs' actions are
subordinated to the general tasks of the single state policy. I am not
referring in this case to the 15 or so basic structures like the
Prosecutor's Office, security service, taxation organs and so on -- they
were already within the purview of the president's representative and were
fairly firmly linked to the center. But there is a huge number of
departmental inspectorates, monitoring organs, and supervisory services of
various kinds. It emerges that in our country the departments are less
numerous than their structures in each region considered separately....
Our task is not to take away an area of someone's power or to
redistribute powers, but to simply put in place that which has been
enshrined in the Constitution and legislation for a long time and to
eliminate the element of haphazardness in the distribution of powers.
Incidentally, the edict, which ratifies the statute, contains a point
ordering the government to carry out work on the optimization of these
structures. I must say that we have broached this subject on several
occasions and it is a devil of a job. Even to understand what as a whole
we have in this or that region and to simply add it up is no simple task. 
This system came into being under Soviet conditions, was based on
approaches to running the state that are out of date, and today it is often
unviable. Of course, specialists have to work out each case individually,
but I do not think that some seed inspectorate or commission on the quality
of goods should remain under the center's control. Some areas will, of
course, be ceded to local authority control. Others will be put under dual
control; this is at present often only the stated position, but there will
genuinely be dual control. For example, in the case of the internal
affairs organs: Everyone should understand that there is a public security
police force that is concerned with law and order in a particular region,
and there is a criminal police force - - a service to combat organized
crime, which is under federal control. And they are both within the
framework of a single department.
There will, of course be services which will remain under the control
of the center alone and carry out what are essentially federal tasks in
this or that region.
The president's intention to reinforce the institution of his regional
representatives is usually presented as something that is confrontational
with regard to the governors. In actually fact quite the opposite is true:
This decision removes from the governors part of the burden of and the
responsibility for federal affairs, giving them an opportunity to
concentrate on resolving local problems for which they, as elected
officials, are directly responsible to the population. The majority of
governors are very sensible people and understand all this.
For the federal cadres in the provinces, this is also a favorable
decision as it strengthens their position vis-a-vis the local authorities
and makes life easier for them. My travels across the regions and my
contacts with people permit me to state this with confidence.
But apart from this there is also a more general task -- to strengthen
the state's role in the regions. It was on this basis that the president
spoke about expanding the role of his plenipotentiary representatives in
his 1997 message. And it is not strictly speaking a question of the
institution as such but of a fully fledged mechanism for the federal center
to bring its influence to bear on the regions in the implementation of a
single state policy on the country's territory.

*********