| MOSCOW, March 16
MOSCOW, March 16 Russia's Economy Ministry has
proposed to cut the value-added tax to 12 to 13 percent from
the current 18 percent from 2009 as a measure to boost growth
in non-energy sectors of the economy, a document showed on
The proposal comes after both outgoing President Vladimir
Putin and President-elect Dmitry Medvedev took the side of the
industrial lobby in a tax debate that dragged on for years
despite strong opposition from Finance Minister Alexei Kudrin.
"The main positive effect (of the tax cut) will be the
change of the quality of economic growth - investment will go
to sectors with high added value," the ministry said in a
letter to Kudrin, who oversees Russian economic policies.
The VAT tax brings about one third of Russia's budget
revenues and Kudrin argues the cut would badly affect the
budget. Critics say the tax is difficult to collect due to
bureaucracy while some of Russia's record budget surplus can be
used to support growth.
The letter comes amid a chorus of tax break proposals,
which include an idea from the financial market watchdog to
scrap taxes on securities transactions as well as proposals by
state oil major Rosneft (ROSN.MM) to ease the tax burden on the
oil sector to spur development of new fields.
The letter also proposes to abolish a preferential 10
percent VAT tax rate for socially important goods such as food
staples and to increase export and excise duties on heavy oil
products to encourage production of lighter products, such as
gasoline and diesel.
The ministry said the measures will boost economic growth
by 0.6-0.7 percentage points within two years and cut budget
revenues by one percent of the GDP.
It also said a lower VAT rate would help curb a widespread
usage of tax evasion schemes.
Other measures include tax breaks for expenses on research
and development, voluntary medical insurance, corporate
contributions to voluntary pension saving schemes and interest
payment on mortgages.
The letter also suggests scrapping a 24 percent corporate
profit tax for transactions involving stakes of over 10 percent
in Russian firms as well as their dividends to encourage firms
with offshore ownership to make such deals in Russia.
Russia enjoyed a record economic growth of 8.1 percent in
2007 despite a stagnant oil industry, whose lobbyists complain
about an excessive tax burden.
Some economists and officials, including the central bank's
monetary policy chief Alexei Ulyukayev, see signs of
Kudrin has managed to successfully defend the budget and
the oil fund where Russia piles up its windfall revenues for
years but yielded to pressure last year ahead of the
parliamentary and presidential elections, agreeing to raise
pensions and wages.
The pressure on fiscal hawk Kudrin, seen by many investors
as the architect of Russia's macroeconomic stability, has
intensified further in recent weeks raising questions about his
future in the new government, which Putin will form as prime
minister after he steps down as President in May.
(Reporting by Darya Korsunskaya, writing by Gleb Bryanski;
Editing by Tim Dobbyn)