President Boris Yeltsin’s decision to recall the new draft tax code was the most important concession won by the Duma in its recent confrontation with the government. (Yeltsin could, for example, have merely had the draft sent to a conciliation commission, in which case the government might have hoped to rescue the document at a later stage.) (Kommersant-daily, 23 October)
In reality, it was unrealistic for First Deputy Prime Minister Anatoly Chubais to expect the new Tax Code to be rushed through at the eleventh hour and be put into effect by January 1, 1998. All seven factions in the Duma condemned the code, for different reasons. Liberal deputies complained that they were only given a draft of the 2,000 clause document a few weeks before they were expected to vote on it. Lawyers complained that it contradicted many aspects of commercial law and the recently adopted Civil Code. Hence, more than 3,000 amendments were proposed by both houses of parliament.
The main economic thrust of the code was to simplify the overall tax regime (cutting the number of taxes from 200 to 30), and to lower the tax burden by about 60 trillion rubles ($11 billion), or 2 percent of GDP. These are laudable goals, but the idea of cutting taxes at a time when tax collection is hovering at around 52 percent of the target level is at best dubious. The extremely low level of federal tax collection is of grave concern to the IMF. The problem lies not in the nominal tax rate but in the government’s inability to get firms to pay up. Oil and gas companies alone owed 17 trillion rubles as of September 1. This week another IMF mission arrived in Moscow to monitor economic policy: it may well choose to recommend postponing the next $700 million loan tranche. (Finansovaya Rossia, October 9, Segodnya, October 21)
Among those opposed to the new tax code are the media. In an open letter to President Yeltsin, a number of leading editors complained that the new code would take away the tax privileges (such as exemption from VAT and import duties) granted to newspapers under a federal law on state support for the mass media passed in December 1995. (Rossiiskaya gazeta, 18 October)
Saratov Oblast Moves to Introduce Private Property for Land.