From now on, no Russian businessman is safe from the beggar’s plate or prison. That is the conclusion one can draw from the news that came in last week.

In light of the record budget deficit — almost 6 trillion rubles ($84.7 billion) — caused by rising spending, the Federal Tax Service is frantically looking for money.

The tax increases introduced at the start of this year have failed to cover the budget deficit: non-resource revenues rose by 10% in the first four months, VAT collections after the rate hike rose by 20%, but oil and gas revenues were almost 40% lower than last year.

And then the Federal Tax Service got involved. Judging by reports from the ground, tax officials have begun quite literally shaking businesses down for their last ruble.

Small businesses have been hit especially hard, particularly those affected by the abolition of the simplified tax regime and the patent system, increasing their tax payments by six- to eightfold. 

Unsurprisingly, many long-suffering entrepreneurs found a solution: closing their individual and limited liability entities before they reach the 20 million ruble ($283,000) simplified tax threshold and then opening new ones so as not to be hit with VAT. 

Then the tax officials come for them, interpreting any opening and closing of legal entities — and even simply having several legal entities — as tax evasion.

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© The Moscow Times