Russian finance minister Alexei Kudrin objects to VAT reduction

The proposal to reduce the value added tax (VAT) from 18 to 13% “will upset our parameters,” Finance Minister Alexei Kudrin said at a Friday meeting of the Competition and Business Council.

“This step will prevent us from meeting the inflation targets and stifle our positive measures,” he said. Kudrin suggested holding a separate discussion of the tax reform with businessmen and telling the government about discussion results, Itar-Tass reports.

Earlier in the day Prime Minister Mikhail Fradkov said that the VAT rate might be reduced. He said the government is so far unable to use Stabilization Fund money because it cannot find “a point of the economic growth.” Fradkov thinks that will be done sooner or later, and “we will be able to reduce the VAT rate on security of the Stabilization Fund.”

Alexander Shokhin, who was elected as the President of the Russian Union of Industrialists and Entrepreneurs (RUIE) on Friday, supported the plans to reduce the value added tax (VAT) from 18 to 13% in 2007.

The intention shows that the tax reform goes on, he said. At the same time, the VAT reduction may cut revenues two or three years later, Shokhin said. “It is important that the government does not compensate these losses with other taxes,” he said.