Publication: Monitor Volume: 6 Issue: 104

Some observers believe the government’s push to lower taxes will encounter serious bureaucratic opposition. As one newspaper recently noted, the tax cuts are likely to be resisted by the state tax authorities and other “control organs,” who have “commercialized” their own operations–that is, who use Russia’s punitive and Byzantine system of taxes as a way to extract alternative payments from businesses. It was suggested that tax reform measures would also run into resistance from many parliamentarians, whose “lobbying” potential would be significantly lowered by such measures, and from many bankers and businessmen, who, under the current system, are able to maintain market dominance in their spheres simply by finding “a common language” with state bureaucrats. It was predicted that the opponents of tax reform would try to substitute “cosmetic changes” in the current tax regime for genuine reform (Russkaya Mysl, May 18).

Meanwhile, President Vladimir Putin today named his economic adviser, Andrei Illarionov as Russia’s envoy to the Group of Seven industrialized nations (Russian agencies, May 26). Illarionov, who will replace Aleksandr Livshits as Russia’s representative to the G-7, said during a visit to Washington yesterday that Russia planned to stop asking the West, including the International Monetary Fund, for loans. Illarionov, who has repeatedly spoken out against IMF loans, arguing that they are bad for Russia’s economy, predicted that the Russian economy would grow as much as 5 percent this year. Russia has received no fresh IMF funds for nearly two years. He also claimed that US$9 billion had returned to Russia from abroad during the first four and a half months of this year (Moscow Times, May 26).

Illarionov has called for a series of radical free-market reforms, including a near-total lifting of restrictions on capital flows, prices and the registration of businesses; an end to government supervision over banks and restrictions on the activities of foreign banks; the establishment of a currency board, which would require Russia to maintain enough hard currency at all times to be able to buy up all the rubles in circulation (Izvestia, May 24).