Medvedev Little Cash and No Ride
By Sean at 21 January, 2008, 7:30 pm
Last week, the Central Electoral Commission released information on the wealth of Gennady Zyuganov and Vladimir Zhirinovsky. Today we got a glimpse at how high presidential favorite Dmitri Medvedev’s paper stack is. According to papers Medvedev filed for his candidacy, in the last four years he earned $71,000, owns a 367.8 sq. meter apartment, and has $111,200 stashed away in a bank. If you think Dmitri’s thug appeal wasn’t bad enough, check out his ride, or really his lady’s ride. Medvedev has no car, and if he wanted cruise Moscow he would have to do so in his wife 1999 Volkswagen Golf. Literally, a car for the people. How great would it be if we found Medvedev on Pimp my Ride? I’m sure Xzibit and Mad Mike could help a brotha’ out.
But wait. Medvedev is chairman of Gazprom. For some reason whatever he makes from that wasn’t included in his income declaration. Gazprom made a profit of $13 billion in 2006. How much scratch he’s getting from that is unknown. I know one thing, he didn’t squander it all on limited edition pink marble vinyl prints of Sabbath Bloody Sabbath.
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The Chairman of the Board of Gazprom doesn’t get paid? Yea, you have to wonder what serious coin he is hiding there.
From what I am told by a Russian accountant friend, keeping two sets of books is common practice with at least small to mid-sized businesses in Russia, in order to keep the taxman away. By all accounts, Russian tax laws are strange, they seem to discourage charitable spending by individuals and corporations (attitude seems to be “you have money to give away to orphans? We didn’t tax you enough!”)
It makes me wonder if all of these pittance incomes cited by politicos are at least partially affected by a backwards tax system that encourages them hide money, and doesn’t consider corporate benefits as “income”. Obviously, some of it has to be due to the under-the-table nature of some of their darker business transactions, but some might merely be due to the tax culture in Russia.
“From what I am told by a Russian accountant friend, keeping two sets of books is common practice with at least small to mid-sized businesses in Russia, in order to keep the taxman away.”
Yep. It’s not just Russian companies that do this. Foreign companies in Russia do it too. Let’s not even talk about how many foreigners in Russia are illegally hired, sans work permit. Anecdotally, this practice is diminishing, but at least it used to be quite widespread and as far as I know still is.
“but some might merely be due to the tax culture in Russia.”
Yep.
Yep. It’s not just Russian companies that do this. Foreign companies in Russia do it too.
Not in Sakhalin they don’t. The auditors here are as sharp as an arrow.
“Not in Sakhalin they don’t. The auditors here are as sharp as an arrow.”
Wow. Hell has frozen over.
Actually, it would probably cost you more in overheads to run three accounting systems than you’d save in tax avoidance (especially given costs in this sense may not be solely monetary). We have to run two accounting systems, one to satisfy the international/western requirements and the other to satisfy the RF requirements. This means our finance department 40% bigger than I’d ideally want it. I wouldn’t know even where to begin running a third system which would avoid the other two. The auditors would be onto it in seconds.
Tim, I’m not being flippant when I say I am genuinely surprised.
Maintaining two sets of books is not the same as deploying two accounting systems. The systems will deal with substantially the same numbers, but applying different definitions. Two sets of books means, well, different numbers, ie to keep some of them hidden from unwelcome scrutiny (eg, tax collectors, minority shareholders, employees, etc.)
Tim, I’m not being flippant when I say I am genuinely surprised.
The western companies get hammered here. The Russian companies happily ignore all labour, safety, and financial laws and get an occasional slap on the wrist. I guess the authorities can squeeze more money from western companies, and don’t run the risk of upsetting the wrong director.
Two sets of books are more for the small guys. As companies get bigger, they have to get more sophisticated to avoid nasty tax surprises.
The norm would be to use shell companies to trade with, so that revenue gets parked off balance sheet. It’s also traditional to make transactions through middlemen, who appear to paly no role in the process other than to launder money. I’ve also come across companies who pay their employees a bare legal minimum, and then the rest by claiming on health insurance (where of course you don’t have to pay social costs). Although in theory at their simplest these schemes are easy to understand, the sheer complexity of them in practice is staggering, and it is all to be in compliance with the tax laws, not to avoid them.
Gazprom is a big international company, so it will have found very sophisticated ways to divert its money into various offshore vehicles, but the principle remains the same. Who owns RosUkrEnergo for example? All completely ‘legal’, but not very clear. And it doesn’t take a leap of imagination to see that the Chairman of this company would expect some remuneration probably via varous off shore and beneficial vehicles…
Katja’s cousin is an accoutant with some construction or real-estate based firm in the Yaroslavkii oblast, so that is where I hear some of these accounting stories.
I also know that to avoid some tax and other business penalties, this same cousin “owns” many of her father’s business assests (he runs a successful landscaping business and an inn or B&B). We’ve joked that on paper she might own half of Rostov Veliky.
I have no doubt that Newman is living in a different world, in terms of business and accounting, than the typical small to mid-sized business in Russia. Even among the oil and gas industry in Russia, Sakhalin sounds like it is subjected to an extra-special dose of Russian bureaucratic love.