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1 James Q. Riordan & Charles C. McLure Jr., Tax Aspects of Improving the Investment Climate in Russia 1 (1992)

handle is hein.taxfoundation/srixz0001 and id is 1 raw text is: TAX FOUNDATION August 1992 Tax Aspects of Improving the Investment Climate in Russia By James Q. Riordan Co-Chairman Fax Foundation and Charles C McLure, Jr Senior Fellow Hoover Institution inviled Iby Russia's State Committee on Taxation and the Ministry of the hconorny to assemble a delegation of lax experts which could guide the new Russian governument in the most efficient, reasonable way to taxftreign investment, the ax Foundation agreed and submitted this statement onJuly 7, 1992, in Moscow to Vice President Aleksandr V Rutskoi and IA. Lazarev, chairman of the Russian State lax Commitee. Preface lhc ' 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 Prosperity in Russia requires that the tax system strive not to discourage the saving and investment that are necessary for economic progress. 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 wotld 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 subnational as well as national govern- ments. For over 50 years, they have guided the Tax Foundation in its similar consultations with the government of the United States. Long-Term Policy Goals Stability Stability is a critical feature of a tax system that will encourage investment. An unstable system creates uncertainty that discourages investment. Reliability Investors should be able to rely on continued application of the tax laws in existence at the time they make their investments. New and heavier burdens should not be imposed after an investment is made. Taxpayers must be able to rely on published laws, decrees, regulations, and rulings. Laws must be administered fairly and consistently, with only limited administrative discretion. Procedures for resolving tax disputes should include administrative hearings and court proceedings, and taxpayers should be protected. from unreasonable and capricious interpretations of the law. Changes in laws should only be applied prospectively, never retroactively. Subnational governments must not be allowed to deviate from (or unilaterally modify) legislation adopted by the federal government. Certainty Laws and regulations interpreting them must state precisely the tax consequences of various actions. This contributes to economic

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