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Deputy Prime Minister Alexander Zhukov on changes to the tax legislation:

We are currently completing work with the deputies in the State Duma on the amendments to the first part of the Tax Code on improving tax administration. Above all, this concerns bringing order to tax inspections. I think this work will be complete in May and the draft law will be adopted.

President Vladimir Putin: Have we already discussed its sections in practical terms?

Alexander Zhukov: Yes, we submitted it to the State Duma during the autumn session, but this is a big and serious draft law and the main thing here is the need to take into account business interests and of course also the interests of the tax service and strike a balance between them so as to avoid any bias in one or the other direction.

The government will soon introduce a whole package of draft laws that will come into force after being passed as from January 1 next year. I would like to say a few words above all about the draft law aimed at developing oil production through creating incentives for developing new oil fields and producing oil at exhausted deposits. The draft law sets a zero tax rate for production in fields in Eastern Siberia above all, and on the continental shelf. We also propose introducing a decreasing coefficient for production in fields that have already been more than 80-percent exhausted. Production is not currently underway at these deposits because it is not profitable, but if we lower the mineral extraction tax, production at these deposits will become profitable.

A draft law has also been drawn up that proposes indexing the excise duty rate at an average of 8.5 percent for all goods subject to excise duties. At the same time, however, we propose that excise duties on oil products not be indexed so as to avoid a rise in petrol and diesel prices due to rising prices on the world markets. We also propose shifting payment of excise duties to the oil refineries, as this will simplify the system and improve excise duty collection.

Vladimir Putin: It will also encourage the export of crude oil.

Alexander Zhukov: That is not quite the case. The fact of the matter is that we currently collect excise duties at the petrol filling stations, but this is a complicated system that creates opportunities for using various schemes to avoid paying the duties.

Vladimir Putin: The current government tried to introduce this system two years ago, I think it was, and many of the regional governors voiced their opposition to it then.

Alexander Zhukov: Vladimir Vladimirovich, this was the case because collecting excise duties at the petrol stations creates a more even distribution across the country. Now we are proposing a mechanism that will make it possible to maintain an even distribution of revenue throughout the country (because not every region has oil refineries) but that at the same time will make the excise collection process simpler and better. The distribution of revenue will remain as it is today, that is to say, the regions will not lose revenue as a result of these changes.

Finally, we propose increasing the social deductions people can claim when paying their personal income tax. These social deductions are for spending on healthcare and education. Currently people can claim a deduction of 38,000 roubles a year, but we propose raising this to 50,000.

These are the main innovations the government is proposing. We will approve these proposals at the next government meeting and submit them to the State Duma.

Vladimir Putin: We have all analysed the legislation in general and the tax legislation in particular. Our aim should be to bring stability to this area. I fully agree with your proposals, especially regarding tax administration. We have had a lot of discussion on this point with the business community. The state’s interests in this respect lie in achieving a certain harmony between the tax services and the companies developing production. But what we ultimately need is stability. I very much hope that the decisions the government is drawing up in this area will be balanced, that the State Duma deputies will help to find the golden mean and that we will achieve long-term stability in our tax system.

Alexander Zhukov: The changes that will take place this year and the changes to the main taxes are aimed precisely at this objective. We seek to ensure that our tax legislation will not undergo any further radical change for quite a long time. In essence, tax reform is nearing completion.

Deputy Prime Minister Alexander Zhukov on modernisation of the customs service:

Yes, we examined this issue at the last government meeting. We support the draft law that proposes maintaining only two bodies and two forms of control at the border – border guards and customs service control. The other bodies will all have to withdraw from the actual customs checkpoints. This will bring order to the work of the customs checkpoints and it will also speed up the passage of goods across the border. In order to achieve overall improvement in the checkpoints’ work we propose setting up a special government agency that will deal with all customs checkpoint administration issues.

Also very important is that, as you rightly pointed out, a large number of customs checkpoints are located in premises that belong to private companies. In this respect, we have drafted an entire action programme to buy these premises where possible and, where acquisition is not possible, to close the checkpoints and open state checkpoints in their place.

Vladimir Putin: And how is this being organised? Who is going to carry out this work?

Alexander Zhukov: We propose that this special agency that is to be set up will carry out this work.

Vladimir Putin: There is already a company working in this area today!

Alexander Zhukov: There is a company called Rostek that works with the customs service. We propose making it a separate entity that will function as an independent government agency.

Vladimir Putin: It used to be only in jokes that we heard about privatising a metre of the state border, but it is obviously our lot to make these tales reality and see that of the 400-odd checkpoints we have, some 300 don’t belong to the state.

I ask the government to speed up the resolution of all these problems and ensure that the work goes ahead faster. We need to find solutions fast and implement them rapidly.

Foreign Minister Sergei Lavrov on the CIS Foreign Ministers’ meeting:

The meeting took place in Moscow last Friday [April 21] and resulted in the adoption of a package of documents, the most important of which concern the implementation of the decisions reached at the CIS summit in Kazan last August, at which you and your colleagues signed the agreement on humanitarian cooperation in the CIS. Acting on this agreement, the Council of Foreign Ministers has approved draft documents aimed at the agreement’s implementation. This concerns an agreement on establishing the Council for Humanitarian Cooperation that will direct this work within the CIS, and an agreement on establishing the Inter-State Humanitarian Cooperation Fund that will finance various cultural, education, science projects, sports exchanges and so on. These decisions also take into account the results of the CIS Artistic and Scientific Communities’ Forum that took place a few days ago in Moscow. The forum’s recommendations will be taken into account in the organisation of exchange programmes.

Interior Minister Rashid Nurgaliyev on the CIS Interior Ministers’ meeting:

Yes, this Council of Interior Ministers held its meeting in Dushanbe on April 20–22 and marked the Council’s tenth anniversary. We examined eight items, of which the most important was cooperation between the CIS law enforcement agencies in the coming future. We examined the implementation of the Council’s anti-terrorism plan for 2005 and the results achieved. We also worked out methods of cooperation in international searches, in combating human trafficking and in exchange of investigative information. We agreed to establish an automated fingerprint examination data base and a data base of bullets and cartridges to help in the effective investigation of serious crimes. Positive decisions were taken on all the proposals that were drafted.

Furthermore, on April 22, joint special-tactical exercises took place involving anti-terrorist divisions from Tajikistan, Belarus, Armenia and Russia. The exercises’ scenario involved neutralising diversionary and terrorist action on CIS territory and showed that our four countries’ special forces are able to work together to prevent terrorist activity, showed a high level of professionalism, coordination and combat skill. The Council of Interior Ministers will hold its next meeting in Kazakhstan in autumn.

Deputy Prime Minister and Defence Minister Sergei Ivanov on work on new weapons systems, the upcoming meeting of the Shanghai Cooperation Organisation defence ministers and exercises held within the CIS countries’ unified air defence system:

On Saturday [April 22], we held very important flight tests of a new weapons system and promising new combat units that will be commissioned in 2008. This is a unified unit and will be delivered to the Strategic Missile Forces and to the Navy. The first launch was conducted at our test ground at Kapustin Yar in Astrakhan Region. The unit reached its designated target within the calculated time and was no more than a few hundred metres off the centre, which is quite a good result, especially for a first launch. A model of the unit reached its designated target at a distance of more than 2,000 kilometres in Kazakhstan at the Balkhash test ground. Incidentally, this is one of the test grounds that we rent. This launch gives us reason now not only to hope but to confirm that all the promising missile systems that we will be commissioning starting from the end of 2006 will be equipped with this unit. Furthermore, our systems can be equipped as single-unit or multiple-unit varieties, that is, with multiple warheads. Of course, the flight tests will continue, and will continue very actively, because we have to keep within the deadlines.

I also wanted to inform you that I am leaving today on a working visit to Beijing, where I will take part in the meeting of the Shanghai Cooperation Organisation defence ministers. This meeting is taking place following a decision by the Shanghai Cooperation Organisation heads of state and will examine a number of issues among which I would highlight the following: the creation of a response mechanism for situations threatening peace, stability and security in the Shanghai Cooperation Organisation region, implementation of the cooperation concept between the member states for combating terrorism, separatism and extremism, and also a third group of issues that is more practical in nature and concerns providing military support for border guards in the event of the threat or the fact of illegal armed formations crossing national borders, and military action to halt them.

In this respect I plan to propose to our partners in the Shanghai Cooperation Organisation that we hold anti-terrorist military exercises on Russian Federation territory in 2007.

Next week large-scale exercises will begin as part of the unified CIS air defence system. As well as the Collective Security Treaty Organisation countries, Uzbekistan and Ukraine will also be taking part in these exercises. A total of 63 planes and helicopters will take part in the exercises, above all, of course, from Russia. We have agreed that Russian planes will land at airfields in Kazakhstan and Belarus, and that planes from these countries will land at our airfields during their air defence missions.

Vladimir Putin: When do the exercises begin?

Sergei Ivanov: They begin on Tuesday under the command of the Russian Air Force commander-in-chief.

Vladimir Putin: Good. On my behalf, thank everyone who took part in organising and carrying out the flight tests of the new unit.

Sergei Ivanov: Thank you.