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Vladimir Putin: Good afternoon,

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This is our second meeting in this format. I very much hope that some things have changed for the better since our previous meeting. At that time a massive and deliberate campaign seemed to be under way to spread rumours about imminent destruction of Russian business and redistribution of property. I am sure we have left these fears behind us. Nothing of the kind is happening. These fears must be replaced by one overriding sense: the sense of responsibility before the people and the country in which we live and work. There are many grounds for the sense of responsibility, one of which is strict compliance with current legislation. The question is, what legislation. It is a serious matter that we must discuss together. I suggest that we address a very specific area of our relations, the law on companies’ profit taxes. I know that the problem worries, or at least interests many of you. On the positive side, the number of non-taxable activities has increased, but the proposed regime of accelerated amortisation has prompted fears in some companies because much of the equipment at our major firms is run down and the basic assets are in a sorry state – and they can find themselves in a spot of trouble. We are aware of this and together with the Government and with you we are ready to hammer out this draft law, but this reworking cannot continue forever. I think it should be completed within a month or a month and a half.

Now about the proposed amendments to the Tax Code. They would abolish charges for resources and introduce royalties, a very important element in the functioning of the energy sector and improvement of the system of transfer pricing. Few people would be happy in a situation when two oil wells work side by side and perform more or less equally, but one of them pays three times less in taxes than the other. We should stop “insulting” oil by referring to it, somewhat ineptly, as “oil liquid.” We should stop these linguistic manipulations. Mr Kasyanov, I think that the Ministry responsible should pay more attention to it than it has done up until now.

I am aware that some of these legislative acts and regulations are prepared by different government agencies, which can sometimes be a problem. Introducing them at the State Duma in their current shape may indeed cause damage to the country’s energy sector. We cannot tolerate that. And this is not the result we aim for, so I urge you to actively join in the work proposed by the Government and seek balanced decisions in this area. Decisions that would make your work in the energy sphere not only transparent, but also predictable. The same also holds for the bodies of government.

I would like to issue a warning that if this work is delayed, the Government will have to regulate this sphere by increasing the export duties. I want our relations on that issue to be absolutely honest and I want you to know our position in advance.

Finally, a third group of issues is a package of draft laws aimed at fighting bureaucracy in the economic field. We have talked a lot about it. A package of four draft laws aimed at mitigating inspection activities, simplifying company registration procedures, reducing the red tape in the issue of licenses, improving the investment climate, plus two drafts that will liberalise currency legislation. I go along with those who believe that we will never create favourable investment conditions until the potential investor is able not only to bring in money, but to use it freely. If the potential investor knows that money has to be brought from a long way off and that it is impossible or extremely difficult to use it, we will never create an investment-friendly environment in the Russian economy. No one should have any illusions about that. I know that this package of legislation is ready, but there is a problem with approvals by various ministries and agencies. Mr Kasyanov, these are my direct instructions to the Government: the whole package must be submitted to the State Duma within three weeks. If the Prime Minister does not act firmly, it will be a long time before all the approvals are obtained.