Russian President Vladimir Putin’s new prime minister, Mikhail Mishustin, has a reputation for getting things done.
During his near-decade long tenure at the helm of Russia’s tax service — whose army of roughly 150,000 employees oversees tax compliance and collections — Mishustin tripled the amount of money his agency delivers to the budget.
Coming during a period of slow economic growth amid sanctions and falling oil prices, those results earned him accolades from the government and made him a logical choice to replace Prime Minister Dmitry Medvedev, who announced on January 15 that his government would resign.
As social unrest grew over low living standards, Medvedev’s government struggled to carry out Putin’s ambitious National Projects, a $400 billion spending program that seeks to boost economic growth. The Medvedev government also failed to meet Putin’s May 2018 decrees to increase wages to specific levels for many state workers.
“After years of focusing on over-insurance, including due to the risk of further sanctions, the Russian authorities need to focus on domestic issues such as growth and better provision of public services,” Elina Ribakova, deputy chief economist at the Institute of International Finance overseeing Russia, told RFE/RL. “An effective manager is needed to make sure that the National Projects move forward and contribute to these objectives.”
However, Mishustin — whom Russian state television called the “special force of the government’s financial policy,” a reference to the tax service’s law enforcement powers — may also be an ideal choice to keep the restless factions within the elite under control, analysts said.
Putin’s January 15 announcement of a revamping of the country’s constitution prompted Medvedev’s resignation — which many analysts describe as a “sacking” by Putin. These developments will create some winners and losers within that elite.
“All of what we have seen [on January 15] suggests that what the Kremlin is most worried about is not the relationship with the population. It is getting the relationship with the elite right and keeping the elite in line and under control,” said Sam Greene, director of the Russia Institute at King’s College London.
“So, having somebody who is an enforcer — who is coming from a tax-police background where they know where the bodies are buried — is probably a more useful person to have around,” Greene said.
Third PM Change
Putin has sought to promote a sense of government stability during his 20 years at the nation’s helm, only changing the government mid-cycle on two previous occasions.
Putin fired Mikhail Kasyanov in February 2004 right before his reelection bid, replacing him with Mikhail Fradkov, a career bureaucrat. Fradkov “resigned” in 2007 ahead of parliamentary and presidential elections, replaced by Viktor Zubkov.
Both Fradkov and Zubkov had worked for the nation’s tax service. Fradkov had at one point headed the tax police, a feared agency. Zubkov had been a deputy tax minister responsible for the northwest region. He later ran the agency combating money laundering.
Greene said this shared background among Mishustin, Fradkov, and Zubkov was not a coincidence.
Mishustin also shares another commonality with those two men, analysts say. He is someone with seemingly no political ambition, and who — despite his powerful position — is not viewed as a successor when Putin’s term ends in 2024.
“Mishustin does not have any political experience or popularity with the electorate and is not part of Putin’s inner circle,” said Tatiana Stanovaya, a political analyst. He is a “placeholder,” she said.
The composition of Mishustin’s cabinet is unlikely to change much from Medvedev’s with the key economic and power ministers to keep their positions, such as Finance Minister Anton Siluanov and Economy Minister Maksim Oreshkin, predicted Vladmir Tikhomirov, the chief economist at Moscow-based brokerage BCS Global Markets.
Digital Tax Man
Russia had struggled for years, especially during the 1990s, to combat widespread tax evasion, a crime which one analyst called a “source of pride” among the nation’s companies and citizens. Wealthy Russians and companies have used offshores to hide money from the tax authorities.
A large fraction of the economy had remained in the shadows with Russia losing as much as 1 trillion rubles ($16.2 billion) a year in tax revenues, then-Central Banker Sergei Ignatyev said in 2013.
The 53-year-old Mishustin has deployed the latest technologies to cut fraud and evasion and boost receipts in the process.
The tax service’s expansive headquarters northwest of Moscow — in a former military town — is now filled with data servers and IT specialists, making it resemble a technology company as much as a government agency.
The tax service collected 21.3 trillion rubles ($345 billion) in 2018, roughly triple the amount it brought in when he took over in 2010, according to TASS. Mishustin told Putin in November during a meeting in the Kremlin that 2019 tax revenues were running about 8 percent higher than the previous year.
The surge in tax receipts has far exceeded the growth in economic activity over the past decade, helping the government plug holes as the economy slumped amid sanctions and falling oil prices.
Russia’s tax service now uses real-time data to track value-added tax (VAT) payments. As a result, the gap between expected value-added tax receipts and actual receipts shrank to less than 1 percent from more than 10 percent just five years ago, Mishustin said in November.
The number of tax inspections at companies — once a notorious problem that stymied investment — fell by 85 percent over Mishustin’s near decade at the helm, according to Vedomsti.
Alexis Rodzianko, the chairman of the American Chamber of Commerce in Moscow, told RFE/RL, that he has received “generally positive feedback” on the tax service under Mishustin.
“Efficiency of collection is up and feedback from members is that professionalism is better,” Rodzianko said. “Also, our experience with the tax foreign advisory council is positive. Over the past year and a half, the quality of dialogue was good and constructive.”
Mishustin’s agency launched online personal tax accounts for individuals and companies and an app for self-employed people, simplifying the process of filing taxes.
Under his tenure, the agency has also rolled out online registers that send data on each transaction to the tax service nearly instantly.
“With the help of the new prime minister, Putin will now build the country similar to the federal tax service — control and accounting, law enforcement actions where they are needed plus digitalization of the whole country,” Russian political analyst Andrei Kolesnikov wrote in a January 15 commentary.