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Russian officials can't track all wage-earners, or income taxes

April 03, 2013|By Sergei L. Loiko

MOSCOW -- The Russian government has no idea how about 44% of the country’s registered workers are making a living, a top official said Wednesday.

Deputy Prime Minister Olga Golodets said the government is unaware of what’s happening with about 38 million of the 86 million Russians registered as workers. About 48 million people are working in sectors of the economy that officials “can see and understand,” she said.

“It is unclear what everybody else is involved in and to what extent,” Golodets said at an international economic conference at the Higher School of Economics in Moscow. “These people create serious problems for the entire society.”

The government’s concerns include significant loss of income taxes. Estimates vary, but experts agree that billions of dollars are not being taxed by the government.

Several analysts and business owners said that lack of trust in the government has much to do with why many workers are keeping information about their earnings to themselves.

“Russia’s credit history as a state is very bad with its citizens, who have been deceived and treated unfairly many times in the past,” Irina Yasina, an economic analyst with RIA Novosty, said in an interview. “Millions of people just don’t trust their own state.”

Andrei, a Moscow businessman who runs an apartment repair and remodeling agency, said he pays wages to a multinational team of about 60 workers from Russia and the neighboring republics of Belarus, Ukraine and Moldova, and feels no remorse that the state doesn’t get a penny in taxes from his business.

“What has the state done for me or my family, or for all these guys I hire?” Andrei, who did not want his last name used, said in an interview.

Andrei referred to early November, when Russian Defense Minister Anatoly Serdyukov was fired over a corruption scandal involving a group of his subordinates and associates who are suspected of embezzling more than $200 million. Serdyukov’s alleged mistress, the former property chief of the Defense Ministry, was put under house arrest in her $10-million  Moscow apartment,  which formerly belonged to the ministry.

“Why should we pay for the lavish 13-room apartment of an ex-defense minister’s lover or other disgusting things like that?” Andrei said.

Yasina said many people hold similar opinions of the government and its officials, which contributes to the tax problem and the lack of information about where people are working.

“In a society where dishonesty of bureaucrats of all levels is common knowledge,” she said, “many people have no qualms about not paying taxes to support this army of corrupt officials.”

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