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President of Russia Vladimir Putin: Mr Shmakov, what will we discuss first, the wage issue?

Chairman of the Federation of Independent Trade Unions Mikhail Shmakov: Yes, the wages. This is the main issue on our agenda.

Vladimir Putin: Yes, it is the main issue for me too.

Mikhail Shmakov: Unfortunately, wage arrears are increasing, although not as much as in the past. But we are concerned about this tendency. As I told you before – unfortunately, the situation has not improved since then – there is a legal way to step up the efforts to reduce wage arrears.

Russia has ratified the Protection of Wages Convention of the International Labour Organisation (ILO). Under the law on ratification, we could add a provision to our legislation, including the Civil Code, starting in August 2013, according to which wages shall enjoy a priority over other payments such as contributions to social funds and even taxes.

If we do this, we will be able to enhance the activity of our tax service, which has been working quite effectively. There must be no wage arrears: payment of wages must have precedence over the payment of taxes.

Under Article 855 of the Civil Code, these payments have equal priority. The Constitutional Court adopted a decision on this issue in the mid-1990s. But it was before Russia ratified the ILO convention. Now that we have ratified this convention, we can take the next step.

Of course, this implies preparations and coordination, and I don’t think this will make everyone happy, for example, the Finance Ministry whose top priority is the budget and not the payment of wages. I think there will be resistance, yet the issue is very important. It concerns wages and people’s ability to receive payment for their work.

Vladimir Putin: They will tell you that the budget is also about wage payments in the social sphere – to teachers, doctors, military and the like.

Mikhail Shmakov: We could look for a compromise in that area too.

Vladimir Putin: Anyway, I believe your idea appears to be substantiated, especially now when we have not yet overcome all of our economic problems, and so we should and must consider this and also look for the compromise you mentioned.

Mikhail Shmakov: Of course, but this calls for discussions. I have prepared a proposal on launching the mechanism of discussions on this issue.

Vladimir Putin: Good.

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