Firm Finds Tax Break: Holiday for Workers

Russia's gun-toting tax police are hardly subtle when it comes to letting the public know the terrible penalties for non-payment of taxes -- dawn raids by armed accountants, crippling fines and dire prison sentences. But there is also a little-advertised carrot to go with the stick -- if you pay your dues to the government's Social Fund on time and in full, you could send your entire staff on a free vacation.


Accountants at Alphagraphics, the Russian franchise of an American print-copy company, discovered this unexpected perk for good citizens when they were contacted by the Social Fund to which they'd been contributing and asked whether they'd like to send one of their employees for a tour of Italy, and the rest to a suburban sanatorium for the weekend.


"It was a pleasant surprise," said Mary Pat Sloan, a representative of Alphagraphics Russia's parent company. "They contacted us and said that our Social Fund balance was so high that we could give all our employees a little mini-holiday. We could choose whether to let it go into the [state] budget or spend it on our employees. Of course we decided to spend it."


Half of Alphagraphics' 50 employees and their families spent the weekend at the Rus trade union sanatorium outside Moscow, and the other half will go next weekend, Sloan said. The company's oldest employee was chosen to go on a week-long holiday to Italy last month, also courtesy of the Social Fund.


The little-known perk is a result of a commonly overlooked clause in Social Fund payments legislation, which stipulates that some of the 43 percent tax that employers are required to pay on salaries can be used "for the benefit of the workers," explained Yelena Vyacheslavskaya of the Social Fund administration.


"The trips are not a gift, they are a benefit for the employees which their company pays for," said Vyacheslavskaya. "We make a list of the available benefits, like health spas, sanatoriums and excursions, and give vouchers which can be redeemed against visits to these places."


The type of benefits offered depends on the size of employers' contributions, said Alphagraphics' chief accountant, Natasha Denayeva. The contributions also cover pensions, maternity leave, sick leave, and an infant's milk allowance.


"It's what used to be called trade union benefits 10 years ago," said Denayeva. "Now it's called the Social Fund, but the idea is the same ... It's not a prize -- the fund is obliged to give us certain services in return for the money which we pay in."


Companies which are late or in arrears with their payments do not qualify for any benefits, said Vyacheslavskaya.


Of several Western corporate accountants contacted by The Moscow Times, only one apart from Alphagraphics was aware of the potential benefits to be obtained from the social fund.


"Frankly, I think few companies take advantage of the scheme because many don't list employees' real wages in order to limit their tax bill, or break down salaries into deductible housing, transport or health allowances," said one accountant, who asked not to be named.


Foreign employees are equally entitled to benefits as their Russian colleagues, said Vyacheslavskaya, as long as they are resident in Russia for at least 182 days per year.


Alphagraphics' Social Fund balance was high enough to qualify for vouchers for the whole staff because the firm's Russian employees are unusually highly paid, earning an average of more than $1,000 per month, Sloan said.


"It was unexpected, but no one's complaining," she said. "Everyone is getting something back from the tax man. That's a benefit you don't get in the United States."