Publication: Monitor Volume: 4 Issue: 175

The second team is headed by Deputy Premier Aleksandr Shokhin, who announced yesterday that the government will shortly submit to parliament proposals for “revolutionary changes to the tax system.” These will include introduction of a uniform income tax rate, a reduction in value-added tax and modification of the profit tax (Russian agencies, September 24).

The first two items were mooted by the acting government of Viktor Chernomyrdin in recent weeks. They were associated with then First Deputy Premier Boris Fedorov, who favors a flat rate of 20 percent income tax reminiscent of the scheme put forward by American millionaire publisher and former presidential candidate Malcolm Forbes, Jr. The third item is so vague that it is unclear what it means. Shokhin and Maslyukov are already known to disagree on the question of printing money to cover the budget deficit, with Maslyukov much more favorably disposed toward the idea than Shokhin. The incompatibility between the two approaches may help to explain why Yevgeny Primakov is having such difficulty putting together a new government. Another explanation is a general reluctance to join a government which, in many people’s opinion, is unlikely to last long.