How a Petersburger Trucker Has Decided to Sue Plato

How a Petersburger Trucker Has Decided to Sue Plato
Venera Galeyeva
Fontanka.ru
October 16, 2017

After getting his first fine for non-payment of fees under the Plato road tolls system, a Petersburg trucker has challenged it in court. The case could become an important precedent. 

Как петербургский дальнобойщик решил «Платон» засудить
Truckers waiting outside a Plato office. Photo courtesy of Svetlana Kholyavchuk/Interpress

Individual entrepreneur Yuri Bubnov has two freight trucks, one of which is on the road, a MAN-produced box truck he uses to deliver consumer goods to Moscow and Vladimir. As a matter of principle, he has not registered the truck with the Plato road tolls system, has not put a transponder on the truck, and does not pay the new Plato fees. In 2015, he was one of the few people who took part in a road rally of truckers from Petersburg to Moscow. His runs take him past Plato sensors outside Tosno and in Tver, Klin, and Novgorod Region.

A sensor mounted on the Pokrov–Elektrogorsk segment of the M7 Federal Highway finally reacted to Bubnov’s truck on September 28. On October 6, the traffic police issued Bubnov a fine of 5,000 rubles for failure to pay his Plato road toll fees. Ironically, the very same day, the Russian government approved a fourfold increase in fines for non-payers. On October 14, Bubnov sent a letter to the Odintsovo City Court in Moscow Region challenging the decision to issue the fine and petitioning the court to move the venue for hearing the case to the Kalinin District Court in Petersburg, the plaintiff’s place of residence. The truck is registered in Bubnov’s wife’s name, so she will be acting as a defender in the case: “I consider the ruling in the administrative case unfounded and illegal, which I shall prove during the trial.” Yet Bubnov could pay a discounted fine of 2,500 rubles by October 26 and live peacefully.

Truckers have tried before to challenge the issuing of fines for failure to pay Plato road tolls, but for formal reason,s e.g., the paperworks was not drawn up properly, the truck’s owner was not behind the wheel during the alleged violation, and so on. Bubnov’s case if fundamentally different. He wants to challenge the law itself and is willing to give up at least a year of his life to do it.

Bubnov expounds his position.

“According to the Russian Federal Civil Code, damage must be paid be jointly by everyone everyone involved in causing damage. However much damage you caused that is how you pay,” he says.

[Bubnov has in mind the government’s original stated rationale for introducing the Plato road tolls system. Since cargo trucks, allegedly, cause more wear and tear on federal highways than other vehicles, the argument went, they should pay additional fees, based on the number of kilometers traveled, to compensate for this damage and thus provide more money for repairing major roads.—TRR]

“In addition, the damage I caused has to be proven. And, according to the Russian Federal Tax Code, payments cannot be arbitrary and should reflect the economic essence of the matter. Empty, my vehicle weighs 7,800 kilograms. The maximum weight of a loaded eighteen-wheeler is 44 tons. Obviously, we cause different amounts of wear and tear on the road. Why, then, should I pay the same amount as the driver of a loaded eighteen-wheeler?”

In May 2016, the Russian Federal Consitutional Court ruled the Plato road tolls system legal. Later, however, Constitutional Court Judge Gadis Gadzhiyev issued a dissenting opinion in which, among other things, he suggested clarifying the purpose of the fee, because, economically speaking, Plato is not compensation for damage, but a payment imposed on owners of heavy trucks for using the roads.

“As currently formulated, the Plato system is at odds with Russian federal laws,” says Bubnov. “By itself, travel on public roads is not an offense. There is a Russian federal government decree in which the maximum loads for different types of vehicle are set. The weight of my vehicle is legal.”

Bubnov also invokes an argument that truckers protesting Plato have made since 2015. If a toll is introduced for driving on a certain section of road, drivers should be provided with an alternative free detour. Otherwise, all federal highways would become toll roads for truckers.

Bubnov already has several legal victories under his belt. He has always served as his own defense counsel, and recently he has voluntarily defended his colleagues from different regions in court. On September 20, 2017, he won the so-called tachograph case, in which a trucker had been accused of violating work safety laws. A similar case is now being tried in Altai Territory.

If Bubnov’s appeal, as appended to his complaint against the Plato road tolls system fine, is rejected, first he will have to go to Odintsovo City Court, then to the Moscow Regional Court to appeal the ruling, and then to the Presidium of the Moscow Regional Court and, finally, to the Russian Federal Supreme Court and the Presidium of the Supreme Court. Bubnov plans to go to the bitter end with the final decision. According to his calculations, the whole process may take at least a year. If his petition is granted, the first three sets of hearings will be held in Petersburg. Bubnov plans on going the entire distance himself, without a lawyer.

“Essentially, Yuri Bubnov’s claims are correct,” says Irina Metel, executive director of the Northwest Carriers and Forwarders Union. “In practice, however, any case requires the assistance of a very competent laywer.”

“We are ready to support Yuri Bubnov in court,” says Maria Pazukhina, head of the OPR (Association of Russian Carriers) regional branch in Murmansk. “We have challenged fines before, but only on formal grounds, for example, due to incomplete lists of evidence or instances where agencies not empowered to do so tried to punish carriers. Yuri’s case is fundamentally different. In my view, the current authorities are unlikely to rule that Plato should be abolished. The OPR has been trying to detect the system’s faults in order to reveal its corruption and inefficiency. But so far we have not launched legal proceedings like this.”

“I’d been waiting for this fine for a year and a half, and I finally got it,” Bubnov told Fontanka.ru. “It’s good it came now, while the sensors have not been turned on everywhere. If the system were up and running normally, it would be harder to challenge the fine. The chances of a ruling in my favor are few, but what if suddenly the case is assigned to a judge who is about to retire and has nothing to lose, and he makes a ruling in accordance with the laws?”

FYI
According to Dmitry Pronchatov, assistant director of the Federal Road Agency, since the Plato road tolls system was launched, carriers have paid over 33.3 billion rubles [approx. 494 million rubles] into the road maintenance and construction fund. Over 900,000 vehicles have been registered in the system. The monies have been used to finance the construction of seven bridges and repairs on twenty-four emergency pipelines, as well as over a thousand kilometers of roads in forty cities and regions. Owners of twelve-ton trucks must pay 1.9 rubles for each kilometer of travel on federal highways.

Translated by the Russian Reader. Thanks to Comrade Koganzon for the heads-up

Poor Russians Up to Their Necks in Debt

ruble coin 2This one-ruble coin, minted in 2014 and sporting the newish symbol for the ruble, adopted in 2013, won’t buy you love or much anything else. 

Poor Russians Go into Debt
Tatyana Lomskaya
Vedomosti
October 11, 2017

Low-income Russians have been unable to wait for an uptick in incomes and have turned to loans to meet their consumer needs. Experts, including the Central Bank, believe such borrowers are a danger to the economy.

The demand of Russians for loans has been growing. In August, their arrears to banks rose to levels not seen since the spring of 2014. Ruble-denominated loans reached their maximum historic high, according to RANEPA’s monthly newsletter Monitoring the Economic Situation in Russia. Banks have been vigourously issuing loans. In July, they provided Russians with 23% more loans than at the same time last year. Consumer loans have been the fastest growing. According to the National Credit History Bureau, such loans increased by 27% over the past eight months.

Loans have been playing a growing role in the budgets of Russian families, notes the newsletter. In the first six months of the year, new loans made up 21% of household final consumption expenditures. This is significantly higher than the crisis levels of the last two years (15–18%), although it is still below the peak levels of 25–27% in 2013–2014. With virtually no increase in the real incomes of individuals, this generates additional risks to their financial circumstances, noted RANEPA’s analysts.

Residents of poor and distant regions are the biggest borrowers of consumer loans at the moment, along with the poorest segments of the populace, notes Natalya Zubarevich, director of the regional program at the Independent Institute for Social Policy. This is how they offset falling incomes. Wages in Russia have been growing since August 2016, but real incomes have continued to fall.

People cannot skimp and save forever. People turn to loans to meet their needs, says Zubarevich. What matters is that banks not issue too many loans, which would raise the specter of a huge number of defaults.

The debt burden has been growing more quickly in regions with the highest poverty levels, according to the FR Group, although the situation varies from region to region, notes project manager Anastasia Zyurkalova.

Russians have been spending more and more of their income on consumption. According to some indications, they have abandoned the savings model of financial behavior, acknowledges Yelena Grishina, head of RANEPA’s research laboratory on pension systems and social sector actuarial forecasting. One of the ways they survive is by taking out loans. Certain segments of the populace have outlived the means they once had for limiting consumption. In the first six months of 2017, a linear dependence bwtween increases in the volume of loans and poverty levels in the regions was observed, says Grishina. Russians are now more positive than a year ago: they have assessed the changes in their welfare, and the percentage of those who skimp on food and clothing has decreased, note RANEPA’s analysts [sic].

The burden of non-mortgage loans is highest in regions with high unemployment and a poorer populace, Alfabank’s chief economist Natalya Orlova wrote last autumn. The middle class [sic] would be unlikely to emerge as the main source of the growth in demand for retail loans, she noted. The average borrower is more likely to be someone with a limited income. Judging by the numbers for the first six months of 2017, nothing has changed, says Orlova. It is still less well-off Russians who want to bring their consumption up to average levels. The increase in retail loans in the poorest regions is likely due to people’s tapping out their savings and and trying to maintain a certain level of consumption, agrees Karen Vartapetov, an analyst at S&P.

A significant portion of the demand for consumer loans comes from people whose incomes are less than the median income in Russia. Often, their incomes are unstable as well, and their debt burdens are high, noted analysts in the Central Bank’s research and forecasting department. (Their opinions may differ from the financial regulator’s official stance.)  Yet banks currently do not really have the capacity for an increase in lending, and so even a moderate uptick in consumer loans is fraught with risks no less serious than during the 2010–2012 loan boom. To limit these risks, the Central Bank has been working out individual debt burden indicators, notes a source at the regulator. The share of an individual’s expenditures on repaying loans should be such she could continue to pay back the loan even if negative events were to occur.

For the time being, the largest banks surveyed by the Central Bank have reported that the percentage of borrowers with increased levels of debt burdens has not grown, and the number of people with monthly incomes of less than 20,000 rubles [approx. 290 euros] who have taken out cash loans has fallen, says the source at the regulator. The banks have been forced to behave more conservatively. Everyone well remembers the wave of late payments in 2012–2013, says Yuri Gribanov, CEO of Frank RG.

After the crisis of 2015, the quality of loan applicants has not improved considerably, notes Sergei Kapustin, deputy board chair of OTP Bank. There are still many people with problematic debts that have not been managed and refinanced at another bank. According to certain channels, the share of such debts is ten percent, and banks have been forced to lower the number of loans they issue. In addition, a number of bankers issue unsubstantially large loans to people who have borrowed money at other banks in amounts disproportionate to their incomes.

The demand for consumer loans is currently quite high, says Mikhail Matovnikov, Sberbank’s chief analyst, and there are still a lot of extant bad loans at high interest rates, especially among low-income Russians. This not at all what the economy needs, and it is bad for borrowers, too, he argues.

The banks’ fight against such loans has pushed borrowers into the arms of microfinance institutions, where the circumstances can be even worse. This year, the microlending market has grown from 186 billion rubles to 242 billion rubles [approx. 3.5 billion euros]. The banks have not met the steadily growing demand for loans, according to research by microlender Home Money.

home money

A screenshot from Russian microlender Home Money’s website. “It’s simpler to make a phone call than to borrow from somebody! Call if you need to! New services: personal legal consultant; home protection; credit history.”

Measures to limit interest rates cooled the consumer lending market in 2015–2016, notes Dmitry Vasilyev, an analyst with Fitch. Currently, the portfolio’s growth matches the nominal growth in incomes of Russians (2–3% during the first sixth months of 2017) and the percentage of risky and unsecured loans has lowered. Some borrowers have drifted to the microlenders, while some banks have been weeded out due to noncompliance with tougher standards, says Vasilyev.

Orlova points out the banking sector is at a crossroads. Maintaining quality lending means not taking on as clients people working in the informal sector and incapable of confirming how much they make and microlenders currently lending at very high rates. Or banks could increase their appetite for risk and take on inferior borrowers to increase their market shares and loan portfolios. Banks have to earn money. If there are no borrowers willing to pay (for example, the government, which would have to become much more active in the state debt market), the issue would become particularly critical. Prospects for income growth in the coming year are worsening, and the risk that not very well-off people would not be able to service their loans is growing, warns Orlova. Poverty will not seriously decline in Russia in the coming year, if we believe the government’s three-year macro forecast, as submitted to the State Duma. It will drop from 12.8% of the populace this year to 11.2% in 2020, i.e., it will not drop to the levels of  2012–2013 (lower than 11%).

Translation and image of the ruble coin by the Russian Reader. Thanks to Comrade Koganzon for the heads-up. The original article, as published yesterday by Vedomosti on the front page of its paper edition, was behind a paywall. Thanks to Press Reader for providing me with the text of the article.

This Is Russia

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“This is Russia. This is the Russia that Americans are so scared of.”

In the background of this photo, you can make out the Galereya shopping mall, located in downtown Petersburg. It’s gigantic, covering the land once occupied by five or six graceful tenement buildings and a cultural center and cinema. They were demolished in the mid 1990s, not to make way for the shopping mall, but so a new train station could be built there, jeek by jowl with the existing Moscow Station, because federal and regional officials wanted to build a high-speed train line between Petersburg and Moscow. Millions of dollars were allocated for the project, but ultimately, the train line was never built nor was the new station erected. No one knows what happened to the millions of dollars allocated for the project. They simply vanished into thin air.

The site of the former-future high-speed train station sat vacant for many years behind a tall, ugly construction-site fence. No one could figure out what do to with all that wasteland, which was in the very heart of the city, not in some forgotten outskirts. However, before the money had vanished, and the project was abandoned, construction workers had managed not only to demolish all the tenement buildings on the site but had also dug a foundation pit. Over the long years, this pit filled up with water. Some time after Google Maps had become all the rage, I took a look at our neighborhood via satellite, as it were, and discovered to my great surprise it now had a small lake in it. It was the foundation pit of the former-future high-speed train station, filled to the brim with water.

Good times came to Petersburg in the 2000s, when the country was flush with cash, generated by high oil prices, a flat tax rate of 13%, and runaway corruption. It was then the city’s mothers and fathers (I’m not being ironic: most of Petersburg’s “revival” was presided over by Governor Valentina Matviyenko, a former Communist Youth League functionary who had converted to the gospel of what she herself called “aggressive development”) decided that Petersburg, one of the world’s most beautiful, haunting, enchanting cities, should be extensively redeveloped, despite its status as a UNESCO World Heritage Site, into a mecca of consumerism that would give pride of place to cars and new highways, since cars had become the new status symbol among the city’s rich and poor alike. They also decided that, since other big cities in the world had lots of high-rise buildings, their city, which did not have almost any high-rise buildings, should have lots of them, too.

Basically, they decided to demolish as much of the inner and outer city as they could get away with—and they could get away with a lot, because they had nearly unlimited political power and lots of the country’s money at their disposal—and redevelop it with high-rise apartment buildings, superhighways, big box stores, and shopping and entertainment centers, each one uglier and bigger than the last. Thanks to their efforts, in a mere fifteen years or so they have gone a long way toward turning a Unesco World Heritage Site into an impossible, unsightly mess.

But let’s get back to our miniature inner-city lake. Finally, developers came up with a plan to convert the site into a giant shopping mall. Even better, the architects who designed the mall were clearly inspired by Albert Speer, Hitler’s favorite architect and a leading Nazi Party member, to turn a rather oversized mall into a celebration of kitsch faux-neoclassicism, precisely the sort of thing Speer had championed in his projects. This, indeed, was a bit ironic, because Petersburg, then known as Leningrad, had survived a 900-day siege by the German army during the Second World War. Considered the longest and most destructive siege in history, it killed at least 800,000 civilians, that is, it killed the grandparents and great-grandparents of many of the people who now enjoy visiting this mall, with its distinctly neo-fascist aesthetic.

Along the sides of the street running down towards the photographer from the Albert Speer Memorial Shopping Mall, you see lots of shiny new, fairly expensive cars, parked bumper to bumper. In fact, the Albert Speer has a huge underground car park where you can park your car relatively inexpensively (our neighbor lady, a sensible woman, does it), but most Petersburg car owners actually think parking their cars wherever they want—especially either right next to their residential buildings or, worse, in the tiny, labyrinthine, incredibly charming inner courtyards of these eighteenth- and nineteenth-century buildings—is their legal right. It isn’t, but they don’t know it or don’t want to know it. I know they think this way because many Petersburg car owners have told me so.

To my mind, the precipitous rise in personal car ownership in Petersburg has done more to degrade the city’s beauty than all the underinspired colossal high-rises put together, because the city was purposely designed by its original builders, beginning with Peter the Great, to have a good number of intersecting and radiating, awe-inspiring, long and clear sightlines or “perspectives.” Hence, many of the city’s longest avenues are called “prospects,” such as Nevsky Prospect (the title of one of Nikolai Gogol’s best stories) and Moskovsky Prospect. Nowadays, however, you gaze down these “perspectives” only to see traffic jams and hectares of other visual pollution in the shape of signs, billboards, banners, and marquees. It’s not a pretty sight.

On the right of the picture, somewhere near the middle, you should be able to spot a small shop sign with the letters “AM” emblazoned on it. It’s one of the dozens of liquor stores that have popped up in our neighborhood after the Kremlin introduced its countersanctions against US and EU sanctions, which were instituted in response to Russia’s occupation of Crimea and invasion of Eastern Ukraine. The US and EU sanctions targeted individuals and companies closely allied with the regime. Putin’s countersanctions, in a manner that has come to seem typical of how the Russian president for life’s mind works, were targeted against Russian consumers by banning the import of most western produce into the country. An exception was made for western alcoholic beverages, especially wines and beers, and this meant it was suddenly profitable again to get into the liquor business. The upshot has been that you can exit our house, walk in any direction, even putting on a blindfold if you like, and you will find yourself in a liquor store in a matter of minutes, if not seconds.

Last summer, I tried painting a little verbal and photographic sketch of the effect this massive re-alcoholization has had on our neighborhood, along with other, mostly negative trends in the use and abuse of commercial space in the city.

Finally, there is one other thing you should know about all those new, mostly oversized cars parked on the street. Since the average monthly salary in Russia barely crawls above 600 or 700 euros a month, even in a seemingly wealthy city like Petersburg, most of those gas-guzzling, air-polluting status symbols were bought with borrowed money.

Just the other day, in fact, I translated and posted a tiny article, originally published in the business daily Kommersant, about how people in the Voronezh Region currently owed banks approximately two billion euros in outstanding loans. In 2015, the region’s estimated population was around 2,300,000, so, theoretically, each resident of Voronezh Region now owes the banks 870 euros, which I am sure is more than most people there earn in two or three months. Of course, not every single resident of Voronezh Region has taken out a loan, so the real damage incurred by real individual borrowers is a lot worse.

I could be wrong, but I think what I have just written gives you a rough idea of how you go about reading photographs of today’s Russian cities, their visible aspect in general, turning a snapshot into something meaningful, rather than assuming its meaning is obvious, right there on the surface. You don’t just tweet a photo of a new football stadium or fancy restaurant or street jammed with expensive cars and make that stand for progress, when progress, whether political, economic or social, really has not occurred yet in Russia, despite all the money that has been sloshing around here the last fifteen years. Instead, you talk about the real economic, political, and social relations, which are often quite oppressive, murky, and criminal, that have produced the visible reality you want to highlight.

Doing anything less is tantamount to engaging in boosterism, whataboutism, Russian Worldism, and crypto-Putinism, but certainly not in journalism. That so many journalists, western and Russian, have abandoned real journalism for one or all of the isms I have listed is the really scary thing. TRR

Photograph by the Russian Reader

 

 

 

Mort à crédit

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Voronezh Region Residents Took Out Nearly 55 Billion Rubles in Loans over Six Months
Ilya Makar
Kommersant
September 28, 2017

From January to July 2017, Voronezh Region residents borrowed 54.7 billion rubles [approx. 800 million euros] from banks, reports the Central Bank’s Central Federal District regional office. Of this total, 43 billion rubles [approx. 630 million euros] were loaned for consumer needs, a figure almost 30% higher than for the same period last year. As of August 1, 2017, residents of the region owed banks 138.4 billion rubles [approx. two billion euros] in loans.

Thanks to Nikolay Mitrokhin for the heads-up. Translation and photo by the Russian Reader

Annals of Import Substitution: Ricotta Days

Because of the severe if not crippling margarine deficit in this district of the ex-capital of All the Russias, I have been reduced to buttering my toast with ricotta.

Pictured, above, is Unagrande Ricotta, my preferred brand, and the brand all the shops in my neighborhood (half of which are Dixie chain supermarkets) seem to have in stock all the time, suddenly.

Despite the Italian-sounding name, however, and Unagrande’s cutesy-pie Italian-tricolor-as-heart logo, it is manufactured not in Italy, which as an EU member, is subject to Putin’s anti-sanctions against the import of most EU produce to Russia.

What has bitten Russian taste buds especially hard has been the sudden absence of decent cheese, which, before the Putin regime decided to rule the world, had been imported to Russia in large quantities, mostly because the majority of domestic Russian cheeses were neither particularly tasty nor plentiful.

Crimea-is-oursism changed all that.

Russians traveling abroad now consider it their patriotic duty to stock up on cheese before heading back to the Motherland, where they will consume it with relish themselves or, since Russians like to share, to divvy up among their friends or have a cheese-tasting party. Likewise, Europeans welcoming friends from the Motherland have been known to serve their country’s finest cheeses before and after dinner.

There are even black market Estonian and Finnish cheese outlets, practically operating in broad daylight, in the farther flung corners of the city. A friend of mine has bought such zapreshchonka (banned goods) in these establishments, usually housed in inconspicuous kiosks, on several occasions.

No, my daily ricotta is produced not in Italy, as the name and the packaging insistently suggest, but at 130 Lenin Street in the town of Sevsk, in the far western Russian region of Bryansk.

Despite its exalted status as the new ricotta capital of Russia, Sevsk is a modest town whose population, according to the 2010 census, was 7,282.

To their credit, however, the Sevskians produce their delectable Unagrande Ricotta from whey, pasteurized cream, and salt. That’s it.

Unagranda Ricotta contains zero percent of the detestable and environmentally ruinous palm oil that other Russian cheese manufacturers have pumped into their cheeses, also bearing European-sounding names, to make up for real milk and cream, which have been in short supply and are more expensive, of course.

So I doff my cap to the honest dairy workers of Sevsk, who have managed to produce a delightful 250-gram tublet of perfectly edible and utterly non-counterfeited ricotta, which sells for 144 rubles (a bit over two euros) at my local Dixie.

I would still like to know, however, what has happened to all the margarine. TRR

Image courtesy of planetadiet.com

Capital Flight for Your Right to Party

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Petersburgers queue at a money exchange point in the downtown as the euro again rises in value against the ruble, August 22, 2017. Photo by the Russian Reader

Half the Kingdom for an Offshore
Since the early 1990s, Russians have exported as much money as is left in the country 
Arnold Khachaturov
Novaya Gazeta
August 24, 2017

Research into the scale of the transfer of money from Russia to preferential tax jurisdictions has confirmed the darkest fears of economists and politicians. The offshore capital of Russian companies amounts to 62 trillion rubles [approx. 888 billion euros], which is comparable to 72% of Russia’s annual GDP and three times larger than the country’s gold and foreign exchange reserves. A handful of hyper-wealthy Russians and major companies have deposited in accounts in Panama (read our special investigation “Offshores: An Autopsy”), Cyprus, and other offshore zones about the same amount of money as the rest of Russia’s populace has left at home. Or, to invoke another comparison, the elites have exported the monetary equivalent of the entire Russian economy during the mid-2000s.

You won’t find this information in the official statistics, of course. These are the calculations reached by three of the world’s leading specialists on inequality—Thomas Piketty, Gabriel Zucman, and Filip Novokmet. (Piketty and Novokmet work at the Paris School of Economics, while Zucman works at UC Berkeley and the National Bureau of Economic Research.) The economists have authored a report entitled From Soviets to Oligarchs: Inequality and Property in Russia, 1905–2016. The report has been published by the NBER, a private research organization based in Cambridge, Massachusetts.

Piketty and his colleagues most often assemble and analyze globe-spanning data sets, but this time they have written a detailed article on a single country. It deals with a particular trajectory in Russia’s progress after the Soviet Union’s collapse: the economy has been sent offshore, and the income gap between the wealthy and the poor has reached critical levels not typical either of the developed countries nor of other post-communist regimes. The report’s authors see this as an example of an extreme form of oligarchic capitalism, which confirms their central hypothesis that a high level of inequality is incompatible a country’s sustainable development.

Although Piketty’s methodology has been constantly criticized due to the insufficient reliability of his data (the use of official Soviet statistics provokes the biggest questions in this instance), the conclusions reached by the world’s biggest star in academic economics and author of the international bestseller Capital in the Twenty-First Century cannot be ignored.

In any country in the world, the major capitalists are engaged in devising different ways to minimize tax payments: economic incentives function the same everywhere. In his previous works, Zucman calculated there is $7.6 trillion tucked away in the world’s offshore zones. In 2014, according to Oxfam, the fifty biggest US companies kept $1.4 trillion in tax havens.

In relative terms, however, this is only 8% of the US economy. The European elites keep approximately the same percentage of their wealth abroad. Returning these assets to their original jurisdictions and adding them to the tax base would certainly be a powerful impetus in the fight against inequality, but the quality of life of the average American or European would probably not change too drastically.

Can the same be said of Russia? Offshores have played a fundamentally different role here.

Due to corruption and the lack of legal protections for business, the Russian economy has been deprived not just of a small part of corporate super-profits, but of almost half of its potential assets. The failure of the deoffshorization campaign has shown the problem in Russia lies much deeper than in western countries. Russian businessmen are trying not so much to evade the practically preferential income tax rate of 13%; on the contrary, in other jurisdictions they are willing to pay twice as much so as not face the Russian tax inspectorate and the Russian courts.

Even if we ignore the origins of the offshore fortunes of the Russian rich, the possible public gain from returning these funds to Russia appears extremely significant. The most conservative estimates predict 400 to 500 billion rubles in additional tax revenues for the budget annually. This was the same amount the federal government spent on healthcare in 2016.

If at least part of this money were invested in the Russian economy, the effect could be much stronger. For example, the Stolypin Club’s strategy argues that, in order to grow, the Russian economy lacks 1.5 trillion rubles annually in the form of business loans. Economist Mikhail Dmitriev proposes allocating the same amount to finance infrastructure projects.

These are conversations in a vacuum, however. Having made their fortunes both in the private sector and government service, wealthy Russians imagine Russia’s “national interests” quite differently.

Translated by the Russian Reader

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This paper combines national accounts, survey, wealth and fiscal data (including recently released tax data on high-income taxpayers) in order to provide consistent series on the accumulation and distribution of income and wealth in Russia from the Soviet period until the present day. We find that official survey-based measures vastly underestimate the rise of inequality since 1990. According to our benchmark estimates, top income shares are now similar to (or higher than) the levels observed in the United States. We also find that inequality has increased substantially more in Russia than in China and other ex-communist countries in Eastern Europe. We relate this finding to the specific transition strategy followed in Russia. According to our benchmark estimates, the wealth held offshore by rich Russians is about three times larger than official net foreign reserves, and is comparable in magnitude to total household financial assets held in Russia.
Abstract to Filip Novokmet, Thomas Piketty & Gabriel Zucman, From Soviets to Oligarchs: Inequality and Property in Russia, 1905-2016, NBER Working Paper No. 23712, August 2017