HIGHLIGHTS-Russia's PM Putin annual report to parliament

MOSCOW, April 6 (Reuters) - Following are edited highlights of Russian Prime Minister Vladimir Putin’s first annual report to parliament on Monday:

ON INFLATION AND RATES

“...Inflation will fall and it means that in the coming months, we could count on rate cuts”.

ON BANKS

“The threat of a banking sector collapse has subsided...”

Putin also asked MPs not to attack bankers too much. “You can call them whatever you want. Fat cats or whatever. But it is an important sector of the Russian economy. It faces tough tasks especially in the second part of the year”.

He said it was important to help the banking sector get rid of problem assets but didn’t say whether Russia needed a so-called “bad bank” to warehouse them.

ON CORPORATE DEBT

“The state does not carry any obligations towards corporate debt,” said Putin who added that Russian companies have managed to repay or restructure $174 billion in foreign debt over the past months, out of total debt of over $500 billion.

ON TAXES

Putin said the government was committed to bringing taxes down but would take a cautious approach.

He also said the time had not come yet to move to a progressive income tax rate from the current fixed rate of 13 percent, as it would lead to companies moving back to black market wages.

“The entire world is envying us (with a tax rate of 13 percent),” Putin said.

Putin also said it would make sense to delay until 2011 an increase in unified social tax to 34 percent from 26 percent.

ON SUPPORT FOR COMPANIES

“We cannot invest funds in inefficient enterprises. It would mean keeping the Russian economy in the past ... To maintain the most important enterprises, the state is ready to directly enter into the capital of certain companies”.

ON THE ROUBLE

“The current rate of the national currency considerably improves the competitiveness of Russian companies”

ON TARIFFS

“A complete freeze on tariffs (gas, power and rail prices) is an eye-catching but not always an efficient decision,” said Putin, who added that those companies would be forced to slash investments and reduce Russian equipment purchases if tariffs were frozen.

ON ECONOMIC CRISIS AND RUSSIAN ROLE

“2009 will be very tough for us,” said Putin who added that the government and the central bank would spend a total of 3 trillion ($90 billion) to fight the crisis.

“The global crisis is not over yet, it is far from over. The situation in the global economy remains uncertain and hides a great deal of challenges ...”

“It would be irresponsible to try and lull ourselves with words of bravado and reckless optimism. But what should -- and must -- be said with all certainty is that Russia will overcome the crisis.”

“The country will beyond all doubt keep its position as one of the largest economies of the world, but at the same time it will have still broader horizons of development, with a more powerful workforce and technological potential.”

ON MILITARY SPENDING

“During the current year, spending on defence will rise by 15 percent from the previous year”.