Organised for crime


-- 24 August 2009 --
TEXT: E. Andreeva
PHOTO: Volodymyr Vasylkiv - Fotolia.com

 

While some criminal activity is normal in any society and - as Emile Durkheim wrote almost a century ago - even necessary, the level of crime in today's Russia is striking.

Crime, by itself, is only a part of the problem. The very fabric of the society that is being built in Russia weaves the high level of criminality. Thus, massive lawbreaking is not something temporary, caused by the times of economical and social disturbances. It is here to stay.

 

The dark side of new Russia

In September 2008 Yevgeny Chichvarkin sold his company Yevroset, the largest retailer of mobile phones, for $400m. A young man of 34, he is a personification of the Russian dream: a businessman who made his fortune not in the murky waters of privatization or through connections with the state but by his talents and entrepreneurial luck.

In different times Yevroset and Chichvarkin were accused in smuggling and tax evasion. In January 2009 he was charged with kidnapping, illegal imprisonment and extortion of Andrey Vlaskin, a Yevroset employee, who in 2003 stole from the company mobile phones worth $600,000. It was claimed that Vlaskin was taken by the Yevroset's security and kept locked in one of the company's apartments until he agreed to repay the losses.

The case illustrates paradoxes of business life in Russia: the curious interdependence of crime and success or, using sociologist Kai Erikson's words, that 'the deviant and the conformist - are creatures of the same culture, inventions of the same imagination.'

It also shows an alarming link between white collar and general crime. Although they might appear quite different many violent crimes are fundamentally similar to the suite ones: they involve efficient but illegal means to solve conventional problems.

There is no reliable information on crime in Russia. Shady recording practices and people's reluctance to report crime make it difficult to indicate the precise level. Indeed, with the official statistics of 18.9 murders per 100,000 population, which is 3.5 times of the US's and almost 12 times of the UK's rate, the authorities report 6 times less rapes than in America and 3 times, than in Britain.

Some idea of the level of criminal activity can be obtained through the number of murders. And the data is quite striking revealing Russia as a clear outlier not only among developed nations, but those with a lower level of economical development.

The picture gets even gloomier when the number of prisoners is taken into account: Russia has the world's highest, second only to the US, number of people in jail with 626 prisoners per 100,000 of citizens.

Massive imprisonment, Elliot Currie from the University of California points out, does not solve the problem but merely shifts offenders from the public eye. To view socially generated criminality, he argued, incarceration and crime rates must be considered together. And from this perspective Russia is the champion.

 

Crime control: the pragmatic approach

It would be unfair to say that government does nothing. Where the state's interests are on the line, and first of all in tax matters, it is ready to act. Over the last decade some landmark victories have been won.

Internal 'offshore' zones Kalmykia, Ingushetia, Smolensk, and Uglich were closed. There local taxes were eliminated in order to attract taxpayers from other, wealthier, regions. At first the practice was tolerated: the main sources of revenues, VAT and excises, were unaffected. Soon, however, it became clear that the remoteness of a tax office and helplessness of provincial inspectors, and not the rates, were sought after.

Several court cases challenged the very way business in Russia works. In 2008 Eldorado Group, the largest network of household appliance stores with turnover of $6bn, faced tax charges of 15bn roubles (app. $470m). In July 2009 an international search warrant was issued for the former general director of the chain Alexander Shifrin.

Eldorado Group is not alone. Moscow Oil Refinery, Svyaznoy, a mobile retailer chain, MIAN, a real estate agency, Moscow McDonald's, Basic Element, an aluminium giant, and others were incriminated with tax evasion. The common element in those cases is that a company was held liable, and criminally too, for taxes unpaid by its suppliers if they were considered sham entities.

The law #73-FZ of April 28, 2009 'On changes to certain legislative acts of the Russian Federation', which came into effect on June 5, 2009, helps the state to look beyond the corporate veil and get into the pockets of those connected to the company.

Although obtaining reliable statistics on tax crime in Russia is impossible, one can get some idea about trends by looking at the cost of obnalichka, converting company's funds into unaccounted cash. In its basic form the scheme works like this: a company sends money to a sham company and then gets the cash less commission. The company evades all taxes, most importantly VAT, income tax, and payroll duties. As this is, perhaps, the most common form of fraud, practiced by many companies, the fee can serve as an indicator of how successful is the fight against tax evasion.

The market indicates that obnalichka is getting riskier and pricier: in 2000 it cost 1.5 - 2%; in 2008, 5 - 6 times higher. Homicides, official statistics suggests, are also in decline: from 31,800 murders recorded in 2000 the number fell by third to 20,000 in 2008.

It appears, at first, that crime in Russia goes down, and does so very rapidly.

 

An elusive victory

Victoria, a 13-year-old girl, disappeared in 2005. In 2007 her body was found in a forest grave few miles from Nizhniy Tagil, her home town in Siberia. She was raped, tortured, and murdered. And so were Olya, 15 y.o., Elena, 14 y.o., and ten other teenage girls and young women. They were kidnapped and later killed for refusal to work in a local brothel.

Although shocking by itself the crime reveals the terrifying truth about work of police. Women had been disappearing for years but by the time their bodies were found almost none of them were in the search lists. The grave, several meters from a bus stop, was found not as a result of investigation but by a passer-by's dog.

Alexander Pichushkin, 33, killed at least 48 people in Moscow in 2001 - 2006. He was able to kill again and again because no one was looking for his victims.

Official statistics gets gloomy when 34,000 unidentified corpses found in 2008, as compared to 13,000 in 2001, or 72,000 people reported missing and not found in 2008, as against 34,000 seven years earlier, are taken into account. It would get chilling if all who disappeared but never reported were added. Russia has become a dangerous place for poor, old, and lone.

During the fat years tax revenues had been growing faster than the country's economy. In 2009 the revenues dropped by 30%. It is feared that tax collection can fall even lower, and huge stabilisation fund can be emptied before the year is over.

The state guessed wrong why Russian companies agreed to become transparent and, as a result, pay more tax. Although pressure from collectors had an impact, it is the benefit of attracting western capital that outweighed the evil of higher taxation.

Now, when repaying existing debt has become the priority, businessmen are prepared to risk. 'Russia returned to the 1990-s,' Natalia, a finance director says, 'It is 'grey' now and it is getting murkier'.

 

By all means necessary

Economical reforms created inequality the Soviet Union did not know. Whether Russians were prepared and, in a wider philosophical context, consented to it is a matter of debate. What is certain is that the scale of disparity came as a surprise. As a shock cropped up realisation that difference in distribution of national wealth has been growing in recent years and that it is, fundamentally, permanent.

However, the high level of inequality per se is not the root cause of crime. Society where success is narrowly understood as a monetary reward forces people to the competitive struggle driven by a desperate emphasis on ends over means. And that is a society organised for crime.

 

 

Some decline in crime rates during the fat years was illusory. The cause of crime is the organisation of Russian society: its structure and response to crime. Gloomy perspectives.
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Comments

Russian Business have been stagnant for years long after Russia embrace the market system. Countries wrought with corruption,dishonesty and cover ups is in delicate balance in business and other wise. Security is another issue. Russia needs Investors as well as exporting their products. If one should ask,the Tambov Mafia based in Saint Petersburg which is rumoured that a prominent Russia worked under the War Lord?the prominent Russian is still in power?if the Tambov Mafia have been banned and declared an illegal and dangerous organization? What of the Soltsevo Mafia group in Moscow? what of the Bandit groups?what of the Skin heads? All these are known all over the world,these are what is hampering Russian business advancement and are disturbing. A step in the right direction is what the Russian President is doing,will he be influenced by an insider?