Tax Seizure Plan Faces

The Finance Ministry is challenging a Supreme Court proposal that would allow tax officials to collect payments from individuals without a court order, which the ministry says would be in violation of the Constitution and, more generally, wouldn’t work.

The ministry is proposing that the government oppose the proposal to collect payments without first going to court, and it has published on its web site a draft government document that would recall the bill.

The Supreme Court wrote in an explanatory note that “materially uncontested cases” to force individuals to pay their taxes are creating an enormous strain on the courts. In 2007, there were just over 2 million such cases, while last year there were almost 3.2 million — one-third of all civil cases, it said.

On May 22, the Supreme Court submitted a bill to the State Duma that would allow the Federal Tax Service to deduct taxes from individuals’ bank accounts. If the sum is not enough to cover the unpaid taxes, the court proposed seizing cash and property.

Initially, the proposals won quite a few backers, including the tax service, which called the initiative pragmatic. The Finance Ministry, a spokesman said, had supported the bill as long as the tax officials would be given access to information about individuals’ accounts.

“What’s the point of expensive court proceedings over kopek-sized cases where no one’s even in disagreement?” Anton Ivanov, chairman of the Supreme Arbitration Court, said in an interview last month.

Duma Deputy Yury Vasilyev, chairman of the Budget Committee, had said the committee recommended that the changes be approved.

But soon the proposal’s position began to weaken. Vasilyev later said the committee would delay hearings on the law and that most likely the Duma would not support the initiative. The Kremlin also came out against the idea, and a source in the presidential administration said the legislative changes were unlikely to pass.

The Finance Ministry, too, had a change of heart. The proposal contradicts the position of the Constitutional Court, the ministry wrote in its proposed recall of the bill. Additionally, the tax officials won’t be able to use the new powers, since individuals — unlike organizations and registered entrepreneurs — are not required to declare their deposits in banks.

Tax officials do not have enough information to work under the proposed changes, a Finance Ministry official said.

Recalling the bill is logical, said Andrei Nazarov, deputy chairman of the Duma’s Legislation Committee. In the fall, the Duma will vote it down, he said.

A White House spokesman said Sunday that he could not comment on the Finance Ministry’s proposed recall or the government’s position on the matter.

The Supreme Court, for its part, disagrees with the criticism.

“We’re studying the Finance Ministry’s position and will take into account its arguments. But we feel that the proposal does not violate any basic legal principles,” a spokesman said. If an individual disagrees with tax inspectors’ decisions, he can turn to the courts, where the tax service will have to prove that the decisions were justified, another court source said.

The Supreme Court “was somewhat egotistically trying to lighten its caseload, without thinking about the civil courts,” said Sergei Pepeliaev, managing partner at Pepeliaev, Goltsblat & Partners.

Inspectors are trying to seize taxes for properties that don’t even exist, since they don’t have a current database of what people own,” said Vitaly Mozharovsky, a partner at Goltsblat BLP, adding that he once received a note seeking payment for taxes on two properties that did not exist.

People frequently receive notices ordering them to pay taxes on stolen cars, said Dmitry Kostalygin, a partner at Taxadvisor. “Once they have the right to seize taxes without a court decision, inspectors will just be handing out collection orders, and citizens will then have to go to court to get their money back,” he said.