He said his Ministry and the Finance Ministry stand for decreasing the value added tax rate in 2006. "We preserved our position on reforming the VAT without decreasing the rate," said Mr. Gref. He noted that this position is coordinated with the Ministry of Finance.
The Economic Development Ministry and the Finance Ministry calculated the reduction of budget revenues in case the VAT rate cuts. According to Mr. Gref, if the VAT is cut to 13%, the budget will lose 300 billion rubles ($1 is 27.70 rubles). With the simultaneous improvement of administration (accelerated reimbursement of the VAT for capital investments and export transactions), the budget will lose 600 billion rubles.
Mr. Gref thinks it necessary to improve the administration of the VAT during the first phase. Only then could the rate be standardized (repeal of benefits), the Minister thinks.
According to him, the rate could then be reduced to 16% (from present-day 18%), but, Mr. Gref believes, it is not necessary. "If the rate is standardized, there will be no need to reduce it," he said. "This tax is quite neutral for business, but it will affect the budget when oil prices fall."
Mr. Gref thinks it would be more important for business to reduce the income tax.
On Tuesday, several Russian publications reported that the day before Finance Minister Alexei Kudrin sent a letter to the Economic Development Ministry. It said that if the VAT rate were decreased to 13% in 2006, the federal budget would lose 362.1 billion rubles (1.6% of GDP).
