RUSSIAN FINANCE MINISTRY SUBMITS THE CONCEPT OF CONTINUED TAX REFORM TO THE GOVERNMENT

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MOSCOW, March 21 - RIA Novosti. On Saturday the Russian finance ministry submitted the concept of continued tax reform to the government, reported Gennady Yezhov, press-secretary of finance minister Alexei Kudrin.

Among the main tasks that we set ourselves is the further lowering of the tax burden, completion within the next two years of the main aims of the tax reform, " Kudrin told a joint meeting of the collegiums of the ministries of finance and economic development on Friday.

Among the main aims, the minister called lowering the single social tax and the value added tax, upgrading the taxation of natural resources, completing the reform of property taxes.

In his words, it is planned to lower from 2005 the maximal rate of the single social tax from the current 35.6 to 26 %, preserving the regressive scale. According to the finance ministry's calculations, as a result, additional 280 billion rubles will remain in enterprises, which they could use to raise wages and modernize production We have not taken such steps to lower taxes throughout the past years, stressed Kudrin.

In his words, as a result of the lowering of the single social tax, payments to the Pension Fund will decrease from the current 28 to 20% , to the Social Insurance Fund - from 4 to 3.2% , to the Obligatory Medical Insurance Fund - from 3.6 to 2.8%. This is why simultaneously with the reform of the single social tax, the finance ministry proposes a number of measures to preserve the stability of state extrabudgetary funds.

In particular, to ensure worthy pensions for citizens, it will be suggested that workers deduce 4% of wages to the accumulation part of their future pensions, said the minister. The state is prepared to compensate for a part of this amount. The finance ministry's proposals on the reform of the taxation of natural resources presupposes the indexation of the rate of the tax on the production of mineral resources and the oil export duty depending on world oil prices, said the minister. "We want to specify this direct dependence of the rate on world prices, lowering it at lower prices but raising it at higher prices," he said.

In the minister's words, calculations show that at the price of Urals brand oil at $27 per barrel, the budget could receive additional $2 billion at the expense of the tax on the production of mineral resources and the export duty.

It is not planned to introduce a differentiated tax on the production of mineral resources within the next few years, said the finance minister.

At the same time, he stressed that "world practice is following the way of a differentiated exaction of the natural rent and we should strive to achieve this, this is right. "However, this requires the elaboration of a relevant normative base, as well as respective management culture", noted the minister.

"We believe and have agreed with the chairman of the government that within the next year or two we will work out a system of administration and make it absolutely normal for transition to the new parameters of the tax on the production of mineral resources," he said.

Kudrin also confirmed the finance ministry's intention to lower the value added tax, starting from 2006, from the current 18 to 16%. The rate of the value added tax to be made single (at present, a 10-percent privileged rate is in force for socially important goods).

At the same time, in the minister's words, other variants of reforming the value-added tax are also being examined.

It has been decided not to introduce VAT accounts, which were to be introduced from January 1, 2005, said Kudrin. In his words, relevant ministries are drafting "another system of upgrading the administration of this tax by using additional mechanisms of account and control".

It is also planned to reform the tax on the property of private individuals and the inheritance and gift taxes, complete the reform of the land tax, upgrade the income tax, introduce water payments, abolish the advertising tax.

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