Businesses Call for VAT to Be Slashed to 10%

The country's largest business lobbies have called on the government to reduce the value-added tax to 10 percent, following President Vladimir Putin's call for an unspecified cut from the current 18 percent last week.

The groups, including the Russian Union of Industrialists and Entrepreneurs, Delovaya Rossia and Opora, said Wednesday that they wanted VAT reforms to include the introduction of a unified VAT rate of 10 percent from next year.

The country now has two VAT rates, of 10 percent and 18 percent.

On Friday, Putin told an expanded session of the State Council that the country "must aspire" to achieve a unified and reduced VAT. After the meeting, Finance Minister Alexei Kudrin agreed that the VAT rate would eventually be reduced but said it was too early to discuss a specific time frame.

A number of business leaders have called for a VAT reduction, including United Company RusAl chief Oleg Deripaska, who in 2006 asked Putin to lower it to 13 percent. In 2006, a cut was backed by then-Prime Minister Mikhail Fradkov, although objections by Kudrin saw the plan scrapped.

Later Wednesday, the groups said the reform could at first lead to shortfalls in budget receipts, but the lower tax burden would eventually spur production and widen the tax base.

The groups also urged the government to create a working group with the Federal Tax Service, the Finance Ministry and business groups to monitor cases of abuses on the part of tax enforcement agencies.