Kremlin Postpones Discussion On 2007 Tax Policy

by Tatiana Smolenskaya, Tax-News.com, Moscow

09 March 2006

The Kremlin has decided to indefinitely postpone discussions on national tax policy for 2007 which were initially scheduled to take place today, Deputy Finance Minister Sergei Shatalov has revealed.

Shatalov told reporters on Tuesday that the government needs more time to analyse an economic forecast submitted by the Ministry for Economic Development and Trade before taking any firm decisions on the direction of tax policy for next year.

However, Shatalov hinted that the government will forge ahead with a plan to unify the rate of VAT. Currently, VAT in Russia is levied at a general rate of 18 percent on taxable supplies, which include the majority of domestic sales of goods and services, but there is also a preferential rate of 10% for certain basic food products, children’s goods, certain medical products, medicines, drugs, and newspapers and magazines, including services related to their production.

Shatalov stated that the VAT issue may be discussed by the cabinet in the coming weeks, although if the unification plan is approved, the change will not go ahead before 2009.

The Russian government is also considering a bill which would give seven year tax holidays for companies extracting new oil deposits in the far east and north of Russia.

Shatalov additionally revealed that a bill on the differentiation of royalty tax rates is being held up because ministers have yet to reach agreement on technical matters.

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