Publication: Monitor Volume: 8 Issue: 52

President Vladimir Putin visited the offices of Izvestia, one of Russia’s leading newspapers, yesterday to wish it a happy 85th birthday. During his visit to the newspaper, he discussed a number of issues with the journalists assembled there. One item was U.S-Russian relations: The president said that while they had “changed for the better,” they were still hampered by the “complicated legacy of the past”–specifically, an outdated “mental frame,” which he said was mostly on the American side. Putin also reiterated his opposition to the death penalty, once again declaring himself opposed to lifting the moratorium on it that Russia instituted in 1996 in order to win entry into the Council of Europe. He also said that he supported alternative military service, saying he wanted to see the passage of a law that would allow pacifists a civilian alternative to regular military service but adding that “no one has the right to speculate on this issue before the appropriate law is passed” (UPI, Izvestia, March 13).

But Putin’s perhaps most interesting comments at Izvestia involved Russia’s economy and recent tax reforms, and the idea of transferring some of the Russian capital’s functions from Moscow to St. Petersburg and other cities. Concerning taxes, Putin said that Russia’s 13-percent flat income tax rate–instituted last year and one of the world’s lowest–should be neither raised nor lowered for now. Meanwhile, other taxes, such as the social tax, should be correspondingly reduced and simplified. He was asked several times whether this meant that the income tax would not be raised, to which he responded that it would remain untouched for the foreseeable future. According to Kommersant, Putin’s responses raised “alarm” among the journalists, who apparently support the flat tax. Finally, after being pressed yet again, the head of state promised that it would not be changed, declaring: “Social democracy in the economy is an expensive thing. We are too poor to enjoy it.”

What is interesting here is not so much Putin’s promise to keep the flat tax, but his initial reluctance to promise that it will not eventually be changed. Indeed, some observers believe the government’s true intentions were revealed in July 2000. At the time, then Deputy Prime Minister Ilya Klebanov said that the flat tax was a “temporary measure” and that income taxes would increase as soon as enterprises came out of the “shadow economy” and stopped hiding their real incomes. In an attempt to assuage such fears, Putin declared in February 2001 that the 13-percent flat-rate income tax was “serious and here for years to come.” Suspicions, however, remained: The newspaper Vedomosti at the time noted that Soviet founder Vladimir Ilych Lenin had also promised when he introduced the New Economic Policy that it was “in earnest and for a long time” (Fortnight in Review, February 16, 2001). Commenting yesterday on the overall economic situation, Putin said that, despite the “positive tendencies” of the last two years, Russia still trailed the world’s major countries. “And if we lag behind, the state will be weak and ineffective, and we will be forced to resort to such mechanisms that will only worsen our situation,” Putin said (Kommersant, March 14).

Another interesting comment made by Putin during his visit to Izvestia involved transferring some of Moscow’s functions as the Russian capital. The Russian president said that he agreed “in principle” with the idea of transferring some of the government’s “central functions” to St. Petersburg and other Russian cities, calling it “a good alternative.” This would “lessen the concentration of swindlers and crooks” feeding off the central authorities, he said (Nezavisimaya Gazeta, March 14).