In a Word

Yavlinsky Vote Ban Upheld

Feb 8, 2012:

The Supreme Court of Russia has backed a decision that bans liberal candidate Grigory Yavlinsky from running for the presidency on 4 March.

Mr Yavlinsky’s party had failed to poll the necessary 7% of the vote in December's parliamentary vote to secure a seat in the State Duma. As Yabloko had no parliamentary representation, he had to secure two million signatures from his supporters. The election commission disqualified the Yabloko leader because every fourth list with signatures was a copy, while the law requires originals.

Yavlinsky said that his team had to use copies to speed up the collection. Today, the Supreme Court has agreed with the election commission that copies couldn’t be accepted.

Yavlinsky hasn’t admitted defeat. ‘The Supreme Court’s decision was predetermined, but we had to go through the procedure,’ he twitted. ‘We are right. We act according to law. Millions of people are with us. Everything just begins’.

Life Expectancy

Feb 7, 2012:

Head of the Ministry of Health and Social Development Tatyana Golikova has announced that in the past five years the life expectancy in Russian has increased by 3.7 years.

According to the minister, in 2011 the life expectancy in Russia was 70.3 years (for men - 64.3 years and for women - 76.1 years). In 2006, men lived 60.4 years and women - 73.2 years. Thus, the average Russian woman lives 10 years less than the average woman in Italy, the United States or Germany. The life of a man in Russia is 15 years shorter than in the developed countries.

The good news is that Russian men do not need to worry about their pension plans: most of them will not live to retirement.

Chemical Castration of Paedophiles

Feb 7, 2012:

The State Duma, the lower chamber of the Russian Parliament, has toughened legislation against sex crimes. Also, the law, approved today in the last reading, introduces chemical castration of paedophiles. RussianLawOnline.Com wrote about sex offences against children in Russia some time ago.

The law provides mandatory chemical castration of those who committed sexual crimes against children under the age of 14 years. Other sexual offenders will be able to choose castration voluntarily to improve their chances of an early release.

The use of the word ‘castration’ in this context is misleading. Chemical castration is, in essence, a drug that temporarily reduces the offender’s libido.

Repeat offenders against minors will face life imprisonment. Probation and deferred sentences for paedophiles will no longer be available. And the percentage of a sentence a paedophile must serve before being considered for parole has been increased from 75% to 80%.

The important defence that at the time of the crime an offender has to know the age of a child has been removed. This makes the prosecutor’s job much easier.

The law also toughens punishment for child pornography. Those involved in it will go behind bars for up to 15 years.

On Social Justice

Feb 6, 2012:

Russia, once again, boasts to impose the luxury tax. First, Prime Minister Vladimir Putin started talks about taxing rich. Then the initiative has been taken on board by the parliamentary party ‘A Just Russia’. The MPs propose a progressive tax of 1% - 5% on cars worth over $100,000 and on real property of $1 million or more.

The idea may seem strange, since Russia remains a country with an incredibly unfair system of taxation. Here, the poor pay more and the rich pay less. The system is tailored to increase the already enormous gap between different parts of the society.

Why, for starters, not to raise the rate of income tax on the wealthy?

It is worth remembering that low taxation of the rich in Russia is due not so much to somewhat distorted views of the Kremlin on social justice as to its inability to collect taxes. The key to understanding Russian taxes is that the government imposes those duties it can gather with ease - payroll taxes, VAT and excise duties.

Collecting taxes on expensive cars is relatively simple. The task can be delegated to the sellers or importers of vehicles. Tax on real estate is much more difficult to assemble and the imposition of the tax can push the market to the ‘grey zone’.

Overall, the luxury tax is just a political move ahead of the elections: actual revenues will be minimal and it has nothing to do with narrowing the gap between the rich and the poor. Instead, one can claim to care about social justice.

The Business Ombudsman

Feb 2, 2012:

Russia will have the business ombudsman, a commissioner for the businesspeople’s rights with a special procedural status, said Russian Prime Minister Vladimir Putin.

According to Putin, the ombudsman will have the right to ‘represent the interests of entrepreneurs in court’, collect their complaints and make suggestions to the state bodies. Also, he or she will have the right to suspend the operation of a government act until a court's decision and, as an interim measure, ask the court to temporarily ban certain activities of public officials.

The Prime Minister has added that the introduction of such an ombudsman will improve the investment climate. He called ‘shameful’ that the country ranks 120th in the world’s investment attractiveness index. ‘Poor implementation of rich potential is Russia’s historic problem’, he added.

Russia's Competition Watchdog Accuses NLMK of Overcharging Russian Buyers

Feb 2, 2012:

Russia’s competition watchdog has accused the NLMK group, one of the largest steel producers in Russia, of overcharging its domestic customers by 100%. The price of electric steel for the Russian market was twice as mush as for foreign buyers.

“The Commission of the Federal Antimonopoly Service has not found economic or technological factors which would justify the difference in prices and concluded that such actions are contrary to the requirements of paragraph 1 of Part 1 of Article 10 of the Federal Law ‘On Protection of Competition’”, the antimonopoly service said in a statement.

While the prices of the electric steel on the world market have been falling, in Russia they remained relatively stable, one of the reasons being that OJSC NLMK and its affiliated company VIZ-Stal LLC are the only producers of electrical anisotropy (transformer) steel in Russia.

Debts, Corporate Veil and Standard of Proof

Feb 1, 2012:

A Moscow court has lifted the corporate veil so that a creditor could reach assets which, technically, do not belong to a debtor. It seems that Russian judges are becoming wary of murky corporate structures.

More importantly, the standard of proof is changing. All that a creditor has to do is to show that it is likely that a debtor owns, or controls, a particular asset. Then, the burden of proof shifts, and it is now the debtor’s job to demonstrate that he or she has nothing to do with the property.

Alfa-Bank has managed to foreclose on the assets of several companies which, the bank claims, are controlled by Alexander Senatorov. The businessman insisted that he is neither the owner nor the beneficiary of the companies whose property has been seized.

The asset, a property complex in the centre of Moscow worth millions of dollars, belongs to several Cypriot companies owned by a group of companies in tax havens. ‘The plaintiff had not submitted the original corporate documents proving that the alleged "corporate chain of control" or "beneficial ownership" of Mr. Senatorov does exist', the debtor’s representative have stated. RussianLawOnline believes, though, that that wasn’t necessary. The debtor has lost fair and square.

Russian Church Is Against Protests

Feb 1, 2012:

The head of the Russian Orthodox Church Patriarch Kirill has said that Orthodox Christians should not attend political gatherings.

‘For the most part Russia is the country of Orthodox Christians,’ he said, ‘Orthodox Christians do not go to rallies. They stand for the Holy Belt of Blessed Virgin Mary.’

‘These people do not march, their voices are not heard, they pray in the silence of their monasteries, in the cells, in their homes. But they are going through with all their hearts what is happening today with our people, and in their minds they see clear parallels between the rowdiness and deliriousness of the pre-revolutionary years with confusion, vacillation and collapse of the country in the 1990s,’ said the Patriarch.

No Income, No Tax. Or is There?

Feb 1, 2012:

Income for tax purposes can be reduced for the amount of discounts (bonuses) given to distributors. This seems obvious but in Russia you have to prove this trivia again and again.

Ford Motor Company had to argue in court that when there is no income there is no income tax. The company did not include in its tax declaration the amount of discounts (bonuses) it gave to dealers. Taxmen, on the other hand, believed that the bonuses must have been taxed because they ‘do not affect retail price’.

This tedious discussion – whether cumulative discounts must be seen as a revenue adjustment mechanism or as a payment for marketing services – has been dragging for too long.

The whole debate is getting queasy since two years ago on December 22, 2009 the Supreme Commercial Court (case №11175/09) ruled that the gross income can be adjusted for the amount of cumulative bonuses.

We wish Ford Motor Company patience, stoutness and a stash of anti-nausea medication.

Russian Banks Grow Too Quickly

Jan 27, 2012:

Russian banks have shown record profits of 848 billion roubles ($26.5 billion) in 2011, which is 50% more than the year before, the Bank of Russia announced yesterday.

Too rapid growth may create problems in future.

Though the boost to the bottom line comes largely from the release of loss reserves, the rate of growth in loan portfolio of Russian banks has more than doubled. Corporate lending grew by 26% and retail lending by 36%.

Yet, the largest banks are growing even faster: Sberbank's loan portfolio in retail grew by 36.6% and in the corporate sector by 34.1%; Gazprombank has increased lending to business by 73% and to individuals by 31%.

According to deputy chairman of the Bank of Russia Alexei Simanovsky this rate of growth is ‘a bit alarming’.

In 2011, real disposable income did not grow. In 2012, Russia’s Ministry of Economic Development expects the GDP growth to slow down from 4.2% to 3.7%. This means that the credit boom in 2011 has far outpaced the growth rate of borrowers’ income and that distance between the two is likely to increase.