Russian ministers clash over crisis-time tax plans
Russia's top economic decision makers clashed on Wednesday over whether some taxes should be cut to help business through the first recession in a decade, or whether the budget cannot afford to lose any more revenue.
Officials painted a fairly glum picture of the oil-dominated economy, saying the economy could contract more than 7 percent in the first quarter of this year, while consumption is falling and the difficult times could last for the next three years.
In an early suggestion of a critical downturn, Russia's statistics service later reported a 13.7 percent industrial output slump in March in year-on-year terms, the second biggest decline since 2002.
President Dmitry Medvedev has urged officials to present a united front on the crisis, but cracks are starting to show.
Prime Minister Vladimir Putin, addressing workers at a rail car factory north of Moscow, forecast a return to economic growth in 2010 and said Finance Minister Alexei Kudrin had predicted a longer crisis because he was stressed.
"Alexei Leonidovich (Kudrin) is in a certain state of stress, because he is under a lot of pressure and on the defensive. But I don't think we will be under this kind of pressure for the next 20 years," Putin said.
The fiscally prudent Kudrin on Tuesday warned Russia should not expect a return of the favorable conditions it has enjoyed in the recent years for the next "five, 10, 20 or 50 years."
On Wednesday, Kudrin warned tax cuts would further undermine falling budget revenues in such a climate.
But the Economy Ministry, which focuses on longer-term event, and an strong Kremlin aide said lower levies may be needed to maintain competitiveness. "For business as a whole ... I agree, we should not increase the financial burden, not even in 2011," top Kremlin economic aide Arkady Dvorkovich told the Russian Union of Industrialists and Entrepreneurs (RSPP).
The management expects Russia's oil-dominated economy to shrink by 2.2 percent this year and says growth might start as late as in 2011, the year when higher social tax levies kick in.
Dvorkovich said they could be compensated by cutting the value-added tax (VAT) rate from the current 18 percent.
"This is my personal forecast ... but I think that some decision to cut VAT could be expected from 2011," he said.
Economy Minister Elvira Nabiullina echoed his comments.
"We think we should not increase the total tax burden on businesses, specifically at the time of crisis," she told the same meeting. "We can propose reforming the tax system ... We need to stimulate spending on novelty, social spending."
Officials painted a fairly glum picture of the oil-dominated economy, saying the economy could contract more than 7 percent in the first quarter of this year, while consumption is falling and the difficult times could last for the next three years.
In an early suggestion of a critical downturn, Russia's statistics service later reported a 13.7 percent industrial output slump in March in year-on-year terms, the second biggest decline since 2002.
President Dmitry Medvedev has urged officials to present a united front on the crisis, but cracks are starting to show.
Prime Minister Vladimir Putin, addressing workers at a rail car factory north of Moscow, forecast a return to economic growth in 2010 and said Finance Minister Alexei Kudrin had predicted a longer crisis because he was stressed.
"Alexei Leonidovich (Kudrin) is in a certain state of stress, because he is under a lot of pressure and on the defensive. But I don't think we will be under this kind of pressure for the next 20 years," Putin said.
The fiscally prudent Kudrin on Tuesday warned Russia should not expect a return of the favorable conditions it has enjoyed in the recent years for the next "five, 10, 20 or 50 years."
On Wednesday, Kudrin warned tax cuts would further undermine falling budget revenues in such a climate.
But the Economy Ministry, which focuses on longer-term event, and an strong Kremlin aide said lower levies may be needed to maintain competitiveness. "For business as a whole ... I agree, we should not increase the financial burden, not even in 2011," top Kremlin economic aide Arkady Dvorkovich told the Russian Union of Industrialists and Entrepreneurs (RSPP).
The management expects Russia's oil-dominated economy to shrink by 2.2 percent this year and says growth might start as late as in 2011, the year when higher social tax levies kick in.
Dvorkovich said they could be compensated by cutting the value-added tax (VAT) rate from the current 18 percent.
"This is my personal forecast ... but I think that some decision to cut VAT could be expected from 2011," he said.
Economy Minister Elvira Nabiullina echoed his comments.
"We think we should not increase the total tax burden on businesses, specifically at the time of crisis," she told the same meeting. "We can propose reforming the tax system ... We need to stimulate spending on novelty, social spending."
