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a) the application of Article 169 of the RF CC implies the instances when the parties receive incomes as a result of criminal activity. In order to justify applying Article 169 of the RF TC, the transactions being concluded must be violating the fundamental principles of the Russian legal order, the principles of public, political and economic organization of society, and its moral foundations. The transactions placed by the Court into this category are as follows:

- those aimed at production and alienation of certain types of objects seized or limited in civilian turnover (certain types of armaments, ammunition, narcotics, and the other products possessing properties that are dangerous from the point of view of life and health of citizens, etc.);

See M. Selivanova. An Article with Confiscation. 29.02.2008. http://www.rbcdaily.ru/2008/02/29/focus/ See ibid.

On foreign experience, see above.

Tax advantage is understood as diminishing the size of tax liability due, in particular, diminished tax base, an obtained tax deduction, tax exemption, the application of a lower tax rate, as well as obtaining the right to reimbursement (or carry forward) of a tax, or tax refund from the budget.

- those aimed at production and distribution of literature and other products promoting war, or national, racial or religious enmity;

- those aimed at production or supply of forged documents and securities.

In the tax sphere Article 169 of the RF CC can be applied by tax agencies, according to the RF SACs Plenum, only within the framework of performing their tasks relating to control of the production and turnover of ethyl alcohol, alcohol and alcohol-containing products, when disputing transactions aimed at production and distribution of products possessing properties that are dangerous for the life and health of citizens. It should be noted that, in principle, the illegal production and distribution of alcohol products is compatible with the principles of invalidity of transactions aimed at production and alienation of objects limited in civilian turnover.

b) The sanctions established by tax legislation, and not the consequences of invalidity of transactions should be applied to the persons who have committed tax violations. The Court directly stated that the sanctions established for committing of public violations of law cannot be qualified as the consequences of invalidity of transactions, and therefore the corresponding requirements should not be taken into consideration in the disputes aimed at recognizing transactions as void on the basis of Article 169 of the RF CC. In those cases when a transaction as such represents a public violation, or a violation is related to the conclusion of such a transaction, then within the framework of considering the dispute resulting from public legal relations the sanctions must be applied which are established by legislation as a measure of responsibility for the committing of a given violation of law, and not the consequences envisaged in Article 169 of the RF CC;

c) the exercise of the right of tax agencies granted to them by Item 11 of Article 7 of the Law of the Russian Federation On tax agencies of the Russian Federation can be possible only to the degree to which the exercise of the right to file petitions of recognizing transactions as void is aimed at performing the tasks of tax agencies. In particular, the Court paid attention to the fact that a demand on the part of a tax agency to the effect that the consequences of invalidity of transaction envisaged in Article 169 of the Code should be applied, when they are justified by the purpose of the transaction being tax evasion, goes beyond the powers of a tax agency, because recovery to the revenue the Russian Federation of everything received (or charged) under a transaction does not represent a measure aimed at ensuring the receipt of tax revenues by the budget.

And it seems that the most significant aspect of the content of the RF SACs Plenums Decree of 10 October 2008, No 22 was the recommendation to arbitration courts and tax agencies that they should present their demands as to the recognition as void of the transactions concluded by a taxpayer in accordance with Article 170 of the RF CC. The Court believes that it is this article that makes it possible to revise the consequences of transactions concluded only for form, without the intention to create legal consequences corresponding to them (fictitious), or for the purpose of concealing another transaction (sham). In particular, in its Decree the RF SACs Plenum stated that the application of Article 170 of the RF CC fully corresponds to the goal of ensuring the receipt of taxes by the budget in full.

On the whole, the limitations imposed by the Supreme Arbitration Court on the practice of arbitration courts in applying Article 169 of the RF CC to tax relations that has become widespread in recent years should be estimated as positive. With due regard for the provisions put forth in the Decree of the RF SACs Plenum, tax agencies and courts should draw a more distinct line between the two types of suits:

- suits to recognize transactions as void under Article 170 of the RF TC;

- suits to recover additional payments charged as a result of requalifying the transactions of a taxpayer or a taxpayers legal status according to the norms stipulated in Subitem 3 of Item 2 of Article 45 of the RF TC.

In the former case a court is not (or very little) interested in the tax consequences of transactions recognized as void. It is interested, first of all, in the proof of their invalidity proper. As a result, a tax agency is not obliged to prove that as a consequence of the conclusion of a fictitious or sham transaction arrears have arisen, and is not obliged to confirm their size, either.

In the latter case the tax consequences of a transaction, for purposes of additionally charging tax base, are to be requalified by tax agencies independently on the basis of Subitem 3 of Item 2 of Article 45 of the RF TC. In this connection a tax agency appeals to a court not with a suit of recognizing a transaction as void, but with the one of recovering additionally charged arrears. Thus one can come to the conclusion that a court should be interested primarily in the facts confirming the arising of arrears, as well as their size.

When estimating the consequences of the issuing of Decree of the RF SACs Plenum of 10 April 2008, No 22, one should pay attention to the fact that this decree has provided only a partial solution to the existing problem. The Russian Federation is not a country where judiciary law is applied, and so the Supreme Arbitration Court may at any time revise its approach to the issue of invalidity of the transactions of a taxpayer.

This has been done many times in the past. Thus, until 2008 the RF SAC had been encouraging the application of Article 169 of the RF TC for tax purposes, and in 2008 it, in fact, recommended that the courts should abandon this practice. This implies that in order to ultimately determine the procedure and terms for revising the tax consequences of transactions it would be necessary to introduce appropriate changes into the RF TC, as well as to abolish the previously mentioned Item 11 of Article 7 of the Law On the tax agencies in the Russian Federation, which is worded too vaguely and leaves too many opportunities for broad interpretations in court.

Municipal reform: the typical trends I. Starodubrovskaya, N. Mironova The first months of 2008 introduced no new principally important trends in the process of municipal reform by comparison with the situation in 2007. With much more justification we can point to the continuation of the processes which began earlier.

Thus, recent analysis of regional legislation on the rates of reform implementation in various regions35 has confirmed that the processes which were revealed in the course of examining regional legislation of are indeed continuing.

Firstly, in 2008 all the regions began to implement municipal reform. In 2007, the only exception was Sakhalin Oblast where all issues of local importance were placed under the jurisdiction of municipal raions.

In 2008, its legislation36 was somewhat changed. In fact, these changes were concerned with only one urban settlement out of those three which had been created in the territory of the Oblast. This urban settlement, Uglerodskoe, was vested with the right to solve all the issues of local importance envisaged in federal legislation. In all the other cases, all the issues of local importance with regard to settlements remain consolidated to municipal raions37.

Secondly, there was an increase in the number of regions where municipal reform was introduced in full.

According to the information received by the IET, their number rose by 10, nine of which started to implement municipal reform in full from 1 January 2008, while the period of transition in Jaroslav Oblast was to be completed on 1 May 2008. Therefore, the period of transition is continuing in 18 regions, where it will be completed on 1 May 200938.

Thirdly, the regions which have introduced municipal reform not in full are characterized by both the tendency to expand the list of issues of local importance transferred into the competence of settlements and by detaching the individual territories where municipal reform is being introduced in full. For example, legislation of Tver Oblast envisages that in 2008 only one issue of local importance for settlements should be consolidated to all municipal raions, except the two of them where reform has been introduced in full, that is, In accordance with Federal Law 129 FZ of 12. 10. 2005, the deadline for the completion of full-scale implementation of municipal reform was postponed until 1 January 2009. This date marks the end of the period of transition during which the regions should annually introduce, by their own laws, the procedure to be used by newly created settlement for resolving issues of local importance, including the volume of powers consolidated to settlements, the financing of issues of local importance, etc.

Law of Sakhalin Oblast, of 25. 09. 2007, # 82 ZO, On Resolving Issues of Local Importance in the Newly Created Settlements in the Year 2008.

On the whole, the administrative units newly created in the territory of Sakhalin Oblast include 2 municipal raions, urban and 3 rural settlements, and 17 city okrugs which in many respects are artificial formations created for the purpose of preserving the one-tier territorial organization of local self-government.

As regards the number and the composition of regions, these data somewhat differ from those presented by the RF Ministry of Regional Development in Itogi realizatsii Federalnogo zakona ot 6 oktiabria 2003 g. N 131 FZ Ob obshchikh printsipakh organizatsii mestnogo samoupravleniia v Rossiiskoi Federatsii [The results of implementing Federal Law, of 6 October 2003, # 131 FZ On the General Principles of Organizing Local Self Government in the Russian Federation], Moscow: Minregion, 2007, p. 70. According to these data, the period of transition has not been completed in 16 regions. The regions which have completely introduced municipal reform are Tiumen Oblast, the Republic of Adygeya, and the Republic of Bashkortostan. No information has been found on the two latter regions with regard to any changes in their regional legislation on the issues of municipal reform, while 2007 legislation did not envisage that in the year 2008 all the issues of local selfgovernment would be tackled by the newly created settlements. In Tiumen Oblast, the powers of settlements were drastically reduced in accordance with the results of the April 2005 referendum. At the same time, it seems advisable that Tomsk Oblast where only one issue of local importance for one settlement only was transferred to the regional level, should be included in the list of the regions where municipal reform has been introduced in full.

organization of gas supply to the population within the limits of a settlement, and also organization of heat supply to the population during the heating season (from 01.01.2008 to 01.06.2008) within the limits of a settlement39. Moscow Oblast adopted the laws on the procedure for solving the issues of local importance in a number of settlements which envisage that municipal reform should be implemented in full therein. They involved approximately 10% of urban settlements of the Oblast, as well as several rural settlements, including all the settlements of Mytishchi Raion.

Such tendencies make it possible to assume that, on the whole, the subjects of the Federation are ready to introduce municipal reform in full from 1 January 2009. At the same time, there exists a growing tension caused by the inability to resolve, within the framework of the mechanisms envisaged by municipal reform, a number of issues crucial from the point of view of regional authorities. One of such issues is represented by changes in the territorial organization of local self government.

The attempts at changing the territorial organization within the framework of the legislatively consolidated procedures made in the first months of 2008 have demonstrated the same trends as in the year 2007. In general, the population do not support such initiatives, and it can be noticed that negative attitude is more typically displayed by weaker municipal formations (those that are being annexed), rather than the stronger ones (those being annexed and the annexing ones respectively). Thus, new attempts at merging have failed in Troitsk Raion of Cheliabinsk Oblast, where it was planned to create two enlarged rural settlements by way of merging three existing settlements in each of them. The merger of the towns of Cheboksary and Novocheboksarks has equally failed to materialize, because more than 60% of Novocheboksarks residents who took part in the local referendum cast their votes against this decision.

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