The Impact of the Russian Taxation on the Material Protection, Control and Accounting (MPC&A) Program

Both the Nonproliferation Agreement and the Agreement between the United States and Russia regarding Cooperation to Facilitate the Provision of Assistance (April 4. 1992) (the \"Bilateral Assistance Agreement\") exempt from all taxes U.S. government contractors and sub-contractors providing assistance under programs such as the Material Protection, Control and Accounting Program (MPC&A). However, neither the Non-Proliferation Agreement not the Bilateral Assistance Agreement were ratified by the Russian parliament, as required by Russian law and, thus, the tax exemptions contemplated thereby were never formalized. Until mid-1998, the program relied solely on the Pickering-Panskov Agreement, which granted tax payment deferrals to U.S. assistance finds until the appropriate legislation was enacted. The Picker-Panskov Agreement was initially valid for a period of six months, and was extended a number of times. On July 15, 1998, the Russian Government announced that the Pickering-Panskov Agreement was no longer valid and the participants in the MPC&A program began reporting tax problems. The MPC&A Program continued following the policy and provisions in hte bilateral agreements of not paying taxes on program funds and equipment sent to Russia. However, the efforts by Russian tax authorities to collect taxes from the Russian institutes, when in most cases did not have the monetary means to pay, took an excessive amount of time away from the U.S. and Russian personnel and therefore, the focus and goals of the MPC&A Program.