Accession to the OECD may serve as a positive investment benchmark

A few days ago in Washington the first round of intergovernmental Russian-US consultations on Russia's accession to the Organization for Economic Cooperation and Development (OECD) was started.

OECD is not an economic union or trade agreement, this is a world-wide organization of almost all industrial countries. The main purpose of the OECD is to harmonize business regulations, including tax legislation, since the formation of common legal standards for the functioning of economic systems can make trade relations more transparent and to minimize market failures in international trade. In addition, the OECD activity is also aimed at combating money laundering, tax evasion, corruption and bribery.

On the one hand, membership in this organization may assist to improvement of the Russian tax legislation, bringing it closer to the best international practices. Herewith, from the political economy point of view, it will be easier to resist domestic lobbying sustainability and / or the emergence of tax corruption loopholes, basing on the international commitments and obligations. For example, now, after joining the WTO (which is a prerequisite for the country accession to the OECD), there is an additional tool to counter the industrial lobby, interested in limiting competition from foreign companies.

On the other hand, the accession to OECD can be a positive investment benchmark, because it implies that Russia is ready to follow the same principles of foreign business as other countries. Herewith, the benefits for Russia will directly depend on whether we really intend to comply with the rules established in the organization, or will rather stick to the strategy of nominal membership, trying to circumvent those rules wherever possible. In the second case, the effect of the positive benchmark of accession will soon be zero, and reputational damage will not allow to benefit from membership in the organization for the development of domestic economy.

A.Yu Knobel, Ph.D. in Economics, Head of Foreign Trade Department