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RUSSIA

Putin Sees Lower Taxes, Fewer Bribes

With three months left in his presidency, Vladimir Putin on Friday called for tax cuts, a downsizing of bureaucracy and less state involvement in the economy -- reforms that he said should allow Russians to live longer and better.

"Russia should become the most attractive country to live in," Putin told a State Council meeting, which for the first time was broadcast live in its entirety on television.

Putin used the 50-minute speech to lay out his vision for the country through 2020. His protege and preferred successor, Dmitry Medvedev, listened attentively as he sat in the front row beside Prime Minister Viktor Zubkov. Medvedev, who is expected to easily win the March 2 election, has not unveiled an economic platform yet, but it is likely to follow the 12-year plan presented by Putin on Friday.

Putin touted the revival of the country's economic might during his eight years in office, but he reiterated his earlier calls to wean the economy off oil and gas and reduce bloated bureaucracy and the state's involvement in the private sector.

There is too much state involvement in businesses, causing "excessive administrative pressure on economy" to become a major obstacle for the country's development, Putin said.
He said some 25 million people, or one-third of the work force, are employed in the state sector. "It's obvious that the state cannot support and does not need such a colossal state sector," he said.

Finance Minister Alexei Kudrin praised Putin's call, but when asked by a reporter why some state corporations, such as Russian Technologies, are expanding, he said, "State corporations are being created in the sectors where the state is needed." Russian Technologies, controlled by Putin's close ally Sergei Chemezov, holds stakes in AvtoVAZ, the country's largest carmaker, and VSMPO-Avisma, the world's largest titanium producer, among others.

Corruption remains a big problem, Putin said. "To this day, it's impossible to start a business within months. You have to go to every office with a bribe: firefighters, hospital orderlies, gynecologists, you name it. It's just a nightmare," he said, eliciting laughter from the hundreds of guests, including governors, ministers, billionaires, television personalities and newspaper editors, in the Kremlin's lavish St. George Hall.

Communist leader Gennady Zyuganov scorned the renewed appeal over corruption. "With the level of corruption seen these days, no law can work. He hit the nail on the head: The bureaucrats have strangled everything. But these are [Putin's] bureaucrats," he said.
Putin called for tax breaks for pension funds and companies investing in health and education, adding that the value-added tax rate should be unified and reduced by as much as possible. He did not specify by how much. Russia now has two VAT rates, of 10 percent and 18 percent.

Companies have lobbied for a reduction of VAT, but a group of government officials led by Kudrin have opposed the measure.

Alexander Murychev, first executive vice president of the Russian Union of Industrialists and Entrepreneurs, or RSPP, the big business lobbying group, said Kudrin would probably have to bow to Putin over VAT. "I think they'll spend the weekend reworking" the documents, he said of Kudrin's group.

Kudrin told reporters that the VAT rate would be reduced in the next 12 years but said it was too early to discuss a specific timeframe.

Putin said the size of the middle class should reach at least 60 percent of the population and that the "unacceptable" gap between the rich and the poor must be narrowed by 2020.
He said one-third of the population had been living in poverty when he became president. Over the past eight years, he said, real incomes have increased by 2.5 times, the stock market's capitalization by 22 times and foreign investment by seven times.

He referred to the Russia of the 1990s as a rich country of poor people -- reprising an expression that he first used during his 2000 presidential campaign.

Russia's "top national priority both now and in the long term" is to invest in medicine, education and people, Putin said.

Among the country's sorest problems are low labor productivity and low life expectancy, he said. He offered few specifics but said that under his plan, productivity would quadruple and life expectancy would grow to 75 years by 2020. "Today, every other man doesn't have the chance to live to be even 60 years. What a disgrace!" he said.

The average life expectancy for men is 59, while the average for women is just over 70. The gap between the two is the widest in the word, said Viktoria Zotikova, a Moscow-based representative for the United Nations Development Program.

She praised Putin's focus on life expectancy. "The business community is very worried about this situation," she said.

When asked about his favorite part of the speech, Federal Security Service director Nikolai Patrushev said he liked how Putin had described the chaotic 1990s and the reforms he had ushered in afterward.

Murychev, big business lobbyist, called the speech an "address to the people."
"It is only logical that, after eight years in office, he leaves in a dignified manner and lays out his vision for the country," he said.

(The Moscow Times 11.ii.08)

 
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