ECONOMIC DEVELOPMENT AND TRADE MINISTRY DOUBTS IF NEW REDUCTION OF TAX BURDEN IS ADVISABLE

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MOSCOW, October 13 (RIA Novosti) - Further reduction of tax burden in the Russian Federation is unlikely to entail acceleration of economic growth rates, said Andrey Klepach, chief of the Macroeconomic Forecast Department under the Russian Ministry of Economic Development and Trade (MEDT), on Wednesday.

"Further reduction of tax burden is working itself out in terms of influence on the economic growth", said Mr. Klepach speaking at a session of the round table "Goals and Perspectives of Budgetary Policy in 2005-2007".

At the same time, according to him, reduction of the tax burden over the past years has provided a serious positive effect on the economic growth. In Mr. Klepach's opinion, reduction of the taxes added 0.2-0.3% of the gross domestic product to the annual economic growth.

In the current situation, in the MEDT official's opinion, reduction of the unified social tax will not encourage exposure of the shadow salaries, while reduction of the VAT in 2006 "will hardly add anything to the economic growth".

The level of non-interest budgetary spendings should be raised from current 12% of the GDP to 13-14% of the GDP, believes Mr. Klepach.

Mr. Klepach explained the need of raising the level of non-interest spendings by the fact that spendings for many social items, including science, were twice as low in Russia as those in the developed countries.

At the same time, Mr. Klepach believes that it would be sound to use the mechanisms of the state-private sector partnership for spending the budgetary funds.

"The right option is not to lay all non-interest spendings on the budget, but to establish state-private structures using the state's funds", said the MEDT official.

In particular, it applies to establishment of state venture foundations and mechanisms of combined state and private sector's investments to infrastructure projects.

In Mr. Klepach's opinion, the use of the state budget's funds through combined stateand private sector's institutions could add 0.1-0.3% of the GDP to the economic growth.

The Ministry of Economic Development and Trade will not lower its forecast of the GDP growth for 2004.

"The forecast will not be reduced. It may be increased or not", said Mr. Klepach. He reminded the audience that currently the GDP growth forecast for 2004 was 6.9%.

The chief of the department noted that the MEDT was adjusting the macroeconomic indices on the basis of the three quarters' results. In particular, according to him, the oil prices index will be adjusted.

"It does not mean, though, that the GDP dynamics will differ", said Mr. Klepach.

The MEDT representative explained that unlike the oil prices a number of indices was lower than planned, for example, the investments growth index.

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