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Wednesday, August 16, 2006

More Neo-Soviet Tax Abuse Aiming to Crush Human Rights NGOs

The Helsinki Federation reports that the Neo-Soviet Kremlin is once again using its tax provisions to attack human rights (hat tip to reader Jeremy Putley who alerted La Russophobe to this story and to Strade's Chechnya Short List, where Putley found it) :

Russia: Apparently Politically Motivated Tax Order Threatens the International Protection Centre

An Appeal by the International Helsinki Federation for Human Rights and the Moscow Helsinki Group

Vienna/Moscow, 14 August 2006.

Consistent with a pattern of harassment against Moscow-based human rights NGO International Protection Centre (IPC) and its founder, Russian human rights lawyer, Karinna Moskalenko, Russian authorities appear to have finally found an “elegant” way to cripple the IPC, using administrative measures via the Federal Tax Service Inspectorate (FTSI).

Starting on 25 November 2005 and lasting for six and a half months, the FTSI carried out a tax audit of the entirety of IPC’s activity, seemingly with the intention to find violations of applicable legislation. On 17 July 2006, tax authorities delivered the results of this audit with a sudden demand for the Centre to pay 24 % profit tax on all of IPC’s projects between 2002 and 2004, totaling around 4.580.000 Roubles /133.600 Euro / 171.500 USD (approximately 3.070.000 Roubles plus a fine of 1.510.000 Roubles), a sum that the IPC certainly cannot afford.

Aaron Rhodes, the IHF Executive Director commented, saying: “One can conclude that this case is a clear example of the misuse of financial laws against politically inconvenient human rights defenders. Ms. Moskalenko and, with her, the whole IPC are punished for taking cases to the ECtHR (European Court of Human Rights). What is more, this happens at a time when the Russian Federation chairs the Council of Ministers in the Council of Europe (CoE), an intergovernmental organisation that is based on the respect of human rights, in which the ECtHR is the biggest cornerstone. This example and the obstruction of human rights disputes before the ECtHR shows the country’s shallow respect of human rights values when it comes to their implementation in practice.”

The International Helsinki Federation for Human Rights (IHF) and the Moscow Helsinki Group (MHG) share the concerns of the International Commission of Jurists (ICJ) regarding their affiliate, the International Protection Centre (IPC), and call on the authorities to reconsider the tax order against the IPC and to ensure that the review of the order be undertaken impartially, free of any political influences.

Background

The tax inspectorate’s claim is based on a very ambiguous tax situation between 2002 and 2005, when, in NGO projects – with the exception of “specific programs in the area of educations, arts, culture, public health, environmental protection and for performing specific scientific research” funded by donor-organizations registered with the Russian Government or falling under the bilateral agreements on tax-free grants from EU and US governmental donors, – could be in theory subjected to income tax of approximately 25%. However, the practice of the tax authorities showed that project grants for human rights (and other) NGOs were not burdened with any profit tax, which made perfect sense, as grants to conduct projects – where all the incoming money has to be spent according to the project budget – are something completely different from profits in commercial enterprises. The IPC, for example, was audited several times between 2002 and 2004 without any violation of profit tax law found. And the absurd norm itself was, in fact, recently modified to accommodate human rights and other forms of non-profit activity.

The projects conducted by the IPC in these years included five projects funded by US donors like the National Endowment for Democracy (NED), the Ford Foundation and the MacArthur Foundation, and one project funded by the Open Society Institute (OSI) Assistance Foundation in Liechtenstein. The project titles were: “Public Reception Office for International Human Rights Defense”, “Advanced Educational Program for Lawyers”, and “Strategic Litigation”.

During that time-period, to be on the safe side, the IPC even asked the US Embassy whether they could rely on the bilateral agreements between the Russian Federation and the United States (regarding the NED-funded projects). The US Embassy assured them that they could.

These projects were clearly either educational or scientific, yet the tax authorities claim that this is not the case and that the donors are not on a “list of such organization approved by the Government of the Russian Federation”. Such organizations’ grants would enjoy tax exemptions. However, the Ford Foundation, the MacArthur Foundation and the OSI are on that list.

Based on the stated purpose of the law – dealing with commercial enterprises, not with NGOs - and the law’s implementation, the IPC had good reason to believe that it would not have to pay profit tax for any of these projects. Consequently, the budget lines in the projects did not foresee profit tax levied on these projects. As a result, the IPC would have to pay the claimed sum out of its running costs. This of course would lead to bankruptcy - which seems to be the exact goal ofthe authorities.

It appears that there are at least three reasons for the apparent desire of the Russian authorities to close the IPC down via administrative measures (i.e. the tax claim). First, the IPC represents numerous Russian applicants in human rights cases before Russian courts and hasalready or is in the process of filing numerous more cases against the Russian Federation before the European Court of Human Rights (ECtHR) and the UN Human Rights Committee. In fact, it has won the first ever case against Russia before both bodies.

Second, several of the cases submitted to the ECtHR concern such “sensitive issues” as human rights violations in Chechnya or complaints by the relatives of hostages who died during the Moscow “Dubrovka” theatre siege in 2002 due to inadequate hostage salvation measures.

Third, the IPC founder and long-time director (until 2003), Karinna Moskalenko, acted as an international defense counsel to the Yukos oil company head Mikhail Khodorkhovsky, who was convicted for tax fraud after a flawed legal process, a case she also filed with the ECtHR. Khodorkovsky’s case led to a number of lawyers being threatened with disbarment for performing their professional duties.

In addition to the above-mentioned interference in IPC activities via the tax inspectorate, there have also been other hostile acts by Russian authorities against the IPC and, in particular, Karinna Moskalenko:

• In October 2005, the Prosecutor General’s office publicly sought to disbar Ms. Moskalenko in connection with the case of Mr. Khodorkovsky.

• In December 2005, Mr. Laptev, the Russian agent vis-à-vis the ECtHR, made an attempt to initiate disciplinary proceedings before the Moscow City Bar, but the bar has refused to follow his request.

• In a case filed by IPC lawyers, Ms. Arutunyan and Ms. Moskalenko with the ECtHR (Ryabov vs. Russia), the same Mr. Laptev submitted to the court baseless allegations claiming that the application was invalid (1), a claim that initiated a police inquiry against one of the IPC lawyers, and tried to use other means to stop the application from proceeding to the ECtHR. In addition, the applicant was subjected to harassment by the authorities.(2)
For further information:

International Helsinki Federation for Human Rights (IHF)
Aaron Rhodes, Executive Director, Tel. +43-676-635 66 12;
Tanya Lokshina, consultant, Tel. +7-495-208 1765 or +7-916-624 1906

International Protection Centre (IPC)
Karinna Moskalenko, Tel. +7 916 651 13 06

Moscow Helsinki Group
Ludmilla Alexeyeva, Chair, Tel. +7-495-207 0769

Endnotes:

(1)Mr. Laptev stated that the IPC lawyer had fabricated the power of attorney and that the contract was void because it was not signed by the applicant. Mr. Laptev also asked the tax authorities to check if Ms. Moskalenko had declared the fees from the case, despite the fact thatthere were no such fees paid yet, as there is still no final judgment.

(2) The applicant, Mr. Ryabov, was constantly questioned by the prison authorities about his relationships with his lawyers and the nature of the contracts. His attempts to resist resulted in threats and intimidation. After an application to the ECtHR by the lawyers to stop such interference, Mr. Laptev successfully initiated another round of police investigations, this time into the contract between another applicant to the ECtHR (Mr. Zhigalov) and the IPC lawyer, Karinna Moskalenko.

1 comment:

Jeremy Putley said...

This Laptev was referred to in an article by James Meek in the Guardian on 12 June (the entire article is at http://www.guardian.co.uk/chechnya/Story/0,,1795410,00.html).

Excerpt follows:

A month after my original request for an interview, I manage to reach Pavel Laptev, Russia's representative to the European Court, on a bad phone line between Moscow and London. Laptev referred me to Russia's official, written programme of action in response to the first European Court judgments. The six-page document gives no details about the results of investigations, or how many servicemen have been convicted of crimes in the Chechen conflict. It recommends no changes in the law or Russia's military code. Most of it consists of a summary of the legal training the Russian military is supposed to give its personnel already. The nearest thing it contains to action is to suggest - not order - that military prosecutors subscribe to the European Court's bulletin.

Squeezed behind a wall of computers in Memorial's overheated, scruffy Moscow office, Alexander Cherkasov said it would be wrong to think that Strasbourg's work had no effect on Russia. The real problem, he said, went deeper. "Russia doesn't have a system of adopting the decisions of the European Court into Russian practice. No system at all. It's not like it was in Turkey, when the Kurdish rulings led to big changes in Turkish law, because the Turkish leadership had the political will and wanted to join the European Union. The decisions of Strasbourg certainly have a resonance here, but for the time being, [Strasbourg] is little more than evidence that such a thing as 'Europe' actually exists."

I questioned Laptev on this. "Believe me, there is a programme in Russia for fulfilling the decisions of the European Court," he insisted. "There are too many people who comment and don't know what they're talking about."

Is Russia ready to be guided by the European Court in reforming its legal system? "There is the occasional time when the European Court seems careless in its Russian judgments, but we do recognise them, and we will obey them," said Laptev. "As in Britain, not everybody is happy with the organs of Europe."

While the European Court - which is understaffed, underfunded and has a backlog of 80,000 cases - lumbers along with its judgments, Chechnya does not stand still. Moscow has subcontracted day to day control of the republic to a former separatist fighter, Ramzan Kadyrov, whose militia appear to operate outside any judicial control. They are so confident, Chechens say, that they do not even bother wearing masks. Their practice, denied by Kadyrov and described by witnesses, of kidnapping, torturing and hostage-taking to get their way, has taken fear in Chechnya to a new level and made complaining to Strasbourg still more difficult.