Tax Stories

Viktor Machekhin (Linklaters) & Roustam Vakhitov (Crowe Expertiza)

Episode Summary

This episode with prominent tax experts from Russia - Viktor Machekhin and Roustam Vakhitov is full of stories, especially from Russian literature, Soviet times and business nowadays: Gogol, Saltykov-Shchedrin, Bulgakov, India 300 years ago, taxes on smoke, and on childless men are some of the topics discussed.

Episode Notes

Russian classics

With both prominent tax experts from Russia - Viktor Machekhin and Roustam Vakhitov we start the chat with what was education and taxation like during the Soviet times. The discussion unwinds when Viktor dives into Gogol’s Dead Souls, Saltykov-Shchedrin’s History of a Town and other Russian classics that are actually tax-based stories. The outcome of the latter story seems very relevant for today’s governments, after 2.5 centuries – just let people do what they like to do and they will be happy to pay their taxes. Mikhail Bulgakov’s quote from The White Guard “Everyone knows that tax inspectors are monsters“ cannot be related to the modern tax collectors’, though. 

Learnings from tax-related historical events

If the country has fair tax authorities, at least you understand what you are paying for, says Roustam. He also recalled how the Netherlands was created – partially due to Spanish aggressive tax collection from traders. Even more famous story is the Boston Tea Party that was also partially a tax event. So – tax authorities and governments should keep the taxpayers fairly and happy as much as possible.

Crazy taxes then and now

There is a new book “Rebellion, rascals and revenue” by Michael Keen and Joel Slemrod on historical events around taxes. One of the stories is about India in 19th century where there were taxes for wearing jewellery, moustache or even covering their breasts when going outside. We discussed some older examples from Russia and what our grandchildren might think about some of the current taxes. Such Russian examples are taxes on smoke (a house with one chimney was one taxable unit; for that reason some people made saunas without external chimneys – so called black saunas) and beard. Nowadays the tourist tax and a payment for hardware where copyrighted art can be copied into (while people are normally streaming) seem quite illogical examples. Viktor remembers that during Soviet times there was a tax for men who after certain age do not have children. 

Russian business today - more compliant

Roustam sees that a modern Russian business plays more or less by the same rules as the European ones. Even more, we discussed in what areas the tax authorities are regarded by many experts as technologically and intellectually advanced, thus making the Russian businesses to follow the advancement. An efficient tax dispute resolution system also adds to the trend of having a modern approach to resolving tax issues in Russia lately. In addition to that the Russian tax reform was successful in calling foreign companies (including the ones at offshores) and assets back home by introducing the CFC (Controlled Foreign Corporation) and amnesty legislation a longer while ago. 

The Baltics

Roustam likes the flexibility of the Baltic tax systems, that in smaller countries the changes can be achieved faster, and thus a more modern and competitive approach can be overtaken quicker. He mentions also tax certainty and ability to discuss matters quite openly with the tax authorities as a priority to set up there as well.