Tax Aspects of Improving the Investment Climate in Russia
Special Report No. 8
Executive Summary The Tax Foundation delegation wishes to see the Russian transition to a free market succeed. This is important for many reasons, most notably because it will improve the living standard of the Russian people and enhance the prospects for world peace.
The delegation wants American companies, by investing in Russia, to be partners in the successful transition. For this to be achieved, the Russian tax system must satisfy the objectives of taxpayers and the government. Prosperity in Russia requires that the tax system strive not to discourage the saving and investment that are necessary for economic progress.
In the delegation’s meetings with representatives of the government, the Parliament, and the State Tax Service, it has shared its views in three areas: 1) the long-term goals for a tax system that is appropriate for a market economy, especially one that does not discourage investment; 2) aspects of the existing tax system that are of immediate concern to foreign investors; and 3) policies that would facilitate foreign investment during the interim period when the Russian tax system is in flux, while a system suitable to the long term is being developed. In all cases, these views are consistent with the Tax Foundation’s long established “Principles of Taxation.” These principles include stability, reliability, simplicity, clarity, economic neutrality, the need for open discussions of policy, fair taxation of international transactions, moderate tax rates, and the importance of applying these principles to the taxes of sub-national as well as national governments. For over 50 years, they have guided the Tax Foundation in its similar consultations with the government of the United States.