Russia Will Continue To Reduce Its Tax Burden, Says Putin

by Tatiana Smolenskaya, Tax-News.com, Moscow

24 November 2005

Russian President Vladimir Putin has stated that the government remains committed both to simplifying tax legislation and reducing the tax burden, although he has cautioned that tax reform must be balanced against needs of business, which requires certainty in the tax code.

"All our plans in this sphere have one aim - to reduce the tax burden," Mr Putin told business leaders during his recent visit to Japan.

According to the President, taxation as a share of the Russian economy, at 34% to 35% of GDP, is lower than in Western Europe where the average is about 40%. However, he went on to add that the government still plans to "reduce this yet further", and assured the business community that tax changes will be carried out in a "completely transparent" fashion.

Since 2002, the Putin administration has reduced and abolished a number of taxes, including turnover tax, payroll taxes, sales tax, and value added tax, which was recently cut to 18% from 20% and could be reduced to as low as 13% in the coming years.

Deputy Finance Minister Sergei Shatalov told reporters on Wednesday that a proposal to cut profit tax to 20% from 24% will also be put on the table within the next two years.

Putin went on to acknowledge that sections of Russia's tax legislation still need to be improved, but he cautioned that frequent legislative changes should not obfuscate tax law and create further uncertainty for business.

"We are constantly telling our government experts that frequent changes in legislation should be stopped. This is very important for business," he observed.

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