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President Vladimir Putin, in a letter to State Duma Speaker Gennady Seleznyov, notes that pending before the Duma are a number of amendments to tax legislation that are part of a large-scale tax reform

May 23, 2000

The head of state believes that the following goals should be achieved as a result of the reform.

First, easing the tax burden on tax payers. To this end several ineffective taxes that have had a negative impact on economic activities are to be abolished, notably the tax on proceeds from the sale of goods and services, a substantial wage fund cut. There will also be a change in the procedure for determining the taxable base of the profit tax.

Second, equal conditions of taxation for all taxpayers. That, said the president, can only be ensured by abolishing unjustified benefits and eliminating distortions in the rules for determining the taxable base as regards certain types of benefits.

Third, streamlining the tax system and reducing the number of taxes.

At the first stage of the reform it is proposed to abolish the taxes on the housing maintenance fund and social and cultural facilities, the tax on road users, and the tax on securities transactions.

Vladimir Putin noted that for the purpose of social justice a flat income tax rate is to be introduced while the non-taxable minimum income is to be substantially raised.

At the second phase of the reform the tax on the purchase of foreign currency and deductions for the reproduction of mineral and raw material resources are to be abolished.

The reform may reduce budget revenues in the short term, so reasonable compensation must be provided for the reduced incomes, especially for the local budgets.

The head of state stressed that an important element of the tax reform is the strengthening of tax administration, which must eventually be integrated within a single agency, thus greatly simplifying things for honest tax payers and giving the state greater leverage with tax evaders.

Vladimir Putin believes that “the tax reform should give a powerful impetus to entrepreneurship, the inflow of investments and rising living standards.”

May 23, 2000