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Last Updated: Friday, 19 March, 2004, 15:24 GMT
Putin pledges sweeping tax reform
Old Russian woman eating bread
The reforms will help to end poverty, says Putin
Russian President Vladimir Putin has announced sweeping tax reforms which he says will benefit business and help to reduce poverty.

Oil companies will be required to pay more tax while social tax paid by Russian employers will be reduced.

Income tax, which at 13% is one of the lowest rates of any industrial nation, will remain at the same level.

Mr Putin, who won a second election term on Sunday, has pledged to double the size of the economy in 10 years.

'No review'

He has said once the tax system is reformed, it must not undergo changes for a long time.

"It is very important that after completion of a tax reform, the basic components of the tax system are not reviewed for many, many years to come," he said.

Finance Minister Alexei Kudrin has given details of the reforms which include:

  • Measures to stimulate job growth

  • Investment in manufacturing and services

  • Ensuring oil companies pay the tax they owe

    "We have never taken such a step to reduce tax before... the revenue will contribute to modernisation and investment," said Mr Kudrin.

    The reduction in social tax paid by Russian companies will save them 280bn roubles ($9.8bn, 5.3bn) in 2005, he added.

    World Bank warning

    The government says the tax cuts will be recovered by increasing levies on the oil industry.

    But Mr Putin says the regime for oil companies would be introduced cautiously so that "it doesn't undermine the energy sector's potential for growth".

    He said reform was necessary to provide "an economic breakthrough".

    The World Bank warned last month that Russia may be overly dependent on oil sales revenue.

    Pension plan

    Russia's GDP grew by 7.2% last year and high energy prices accounted for three quarters of that growth, Russia's economics minister German Gref said.

    He said the government should reduce its reliance on oil and employ measures to stimulate the domestic economy.

    Russia's economy needs to grow by 5% each year to reduce poverty and to be able to afford the reforms, he added.

    The new proposals also include schemes to encourage employees to contribute to pension funds and to retire later than the official pension age of 60 for men and 55 for women.

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