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Bribes are no longer tax deductible

by | 4th, September 2012

BRIBES are no longer tax deductible. This is a bit of a change:

“Expenses incurred while committing legal violations, including providing bribes or kickbacks, are not recognized for the purposes of tax assessment,” the Ministry said in a statement posted on its website. Any official paying bribes will therefore have to pay the standard 20pc income tax, according to Russia’s Vedomosti newspaper. The clarification is relevant for for Russian arms exporters and commodity companies that have assets in the Third World, the paper cited tax officials as saying.

A change in the law that is, not so much of a change in practice. For bribery is endemic in the Russian business world. You bribe for simply everything. As an example, one major mining company was recently found paying the US university fees of the son of the local police cheif. That’s just what you have to do to make sure that the coppers don’t stop every truck, every van, every car from the plant and “inspect” it.

But we shouldn’t be too superior about this. When I worked out there in the 90s I made contact with our own Inland Revenue. I had to make (we were a small business so they were small amounts) various payments to various people. Might be champagne and flowers for the (female) customs officer that let entirely legal goods through without delays. Up to a few thousand dollars here or there to secure a major contract (again, major to a small company).

So, given that I was having to pay these amounts for which I obviously didn’t have receipts, how should I account for them to the taxman? The answer was that bribing foreigners was entirely legal and I should just declare them as such in my accounts. Tax deductible they were. This isn’t true any more but it was as recently as 15 years ago. So Russia aren’t that far behind.

Although they’ve still got a way to go: stopping Russian officials from paying bribes is one thing. Trying to get them to stop taking bribes will be another.

Photo: Elena Panfilova, director of Transparency International Russia, speaks at a news conference in Moscow Wednesday, Nov. 2, 2011. The watchdog group’s Bribe Payers Index released Wednesday shows Russian and Chinese companies most active in using corrupt practice when working abroad. (AP photo/ Misha Japaridze)

 



Posted: 4th, September 2012 | In: Money Comment | Follow the Comments on our RSS feed: RSS 2.0 | TrackBack | Permalink