Russian Government Pushes Business Tax Cuts

by Tatiana Smolenskaya, Tax-News.com, Moscow

12 April 2004

The Russian government yesterday discussed a $10 billion package of tax cuts designed to boost entrepreneurship and help achieve President Vladimir Putin’s goal of doubling the nation’s gross domestic product by 2010.

"Our task is to achieve a considerable reduction of the tax burden and, by doing this, to achieve a faster growth rate of the economy," Prime Minister Mikhail Fradkov stated in a cabinet meeting convened to discuss the tax cuts on Thursday.

One of the central planks of the tax cut package is a plan to reduce the payroll tax paid by firms from 35.6% to 26%, a measure that is expected to release an additional 280 billion rubles ($9.8 billion) into the economy.

“This is a substantial sum that will remain at disposal of enterprises, which will lead to an increase in wages and investment,” Fradkov observed.

However, the government is planning to recoup some of the revenue lost through tax cuts with an increase in levies placed on the nation’s oil and gas sector, which are anticipated to raise up to $3.5 billion for the state’s coffers should oil prices remain high.

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