Putin Program Calls for Tax Cuts

APDeputies from United Russia, A Just Russia and the LDPR giving Putin a standing ovation after his 45-minute speech.
Shortly before being confirmed as prime minister, Vladimir Putin laid out an ambitious program of lower taxes and higher spending in the State Duma that cheered investors.

The unprecedented 392-56 vote on Thursday completed a carefully choreographed transfer of power that will likely see Putin remain as influential as the president -- if not more -- for years to come.

President Dmitry Medvedev appointed Putin as prime minister in a decree published an hour after the vote. Medvedev also turned up at the Duma to introduce Putin in a short speech, saying their "tandem" would only get stronger with time.

Investors welcomed a commitment by Putin to announce a cut in oil-exploration taxes by August, with the benchmark RTS Index quickly jumping 3.5 percent before edging back slightly. Russian oil and gas stocks in London continued the rally Friday.

The RTS and MICEX ended the week up, by an impressive 7.6 percent and 7.7 percent, respectively, as investors welcomed Putin's comments and a pledge by Medvedev at his inauguration to support economic freedoms.

Mikhail Metzel / AP
Putin, President Dmitry Medvedev and Duma Speaker Boris Gryzlov leaving after Thursday's session in the Duma.
The promise on oil taxes in particular had "reignited" financial markets, Yaroslav Lissovolik, chief economist for Deutsche Bank in Moscow, wrote in a note to investors.

Putin said in his speech to the Duma that the government's combined tax take in the oil industry of 75 percent to 80 percent of profits was discouraging the exploration of new fields.

The Duma session also saw Putin facing direct public criticism of his government's record -- a rare occurrence in current domestic politics -- as Communist leader Gennady Zyuganov slammed Putin's eight years in office as "a time of missed opportunities."

In Putin's 45-minute speech, occasionally interrupted by applause, he said he would work to bring inflation back to single digits "in the next few years" and pledged financial market reforms to ensure that Russia would become one of the world's major financial centers with a "large class of investors."

The country's legislation needs to be updated to bring about a level playing field in financial operations and the introduction of modern settlement systems on stock markets, Putin said.

Putin also called for support of industries that produce high-tech goods and services and increases to pensions and salaries in the armed forces. Under one of his proposals, the federal budget would earmark 25 billion rubles ($1.1 billion) starting next year for extra payments to servicemen at key military units with submarines, strategic bombers and missiles.

Reiterating some proposals from his February speech to the State Council, Putin said other priorities included cutting red tape, leveling the playing field for private and state companies, developing agriculture amid rising world food prices, and improving education, health care and housing conditions.

The speech ran well past the 15-minute slot allotted him, but no one complained. When he finished, most deputies rose to give him a standing ovation.

Deputies from three factions -- United Russia, A Just Russia and the Liberal Democratic Party -- voted for Putin's appointment. The only opposition came from the 56 Communists, who all voted against him. Of the chamber's 450 deputies, two did not vote.

When Zyuganov took the floor after Putin's speech, his tone was forceful and accusatory. He blamed Putin for failing to preserve the level of democracy that he had inherited and ignoring sectors such as science and farming. He slammed a Cabinet decision earlier in the week to steeply raise prices for gas, electricity and rail cargo transportation.

On inflation:
"Our goal is to reduce inflation to single digits within the next few years."

"It is important to develop the agricultural sector to avoid price rises."

On taxes:
"I believe that we need to decide on the strategy and tactics of further tax cuts no later than by August. [We must decide] when and by how much we need to cut taxes to create additional stimulus for economic development."

"The government will present all its tax initiatives to the Duma during the upcoming fall session."
On the oil sector:
"The time has come to take a decision to reduce the tax burden on this sector to encourage oil production and refining growth."
On the minimum wage:
"I believe it is necessary for the State Duma to approve a law as early as this spring to raise the minimum wage in our country to 4,330 rubles ($180) from Jan. 1."
-- Reuters

Zyuganov also complained that Putin had ignored his recommendation to become the head of the Russia-Belarus Union, a largely ceremonial post.

While Zyuganov's comments appeared aimed directly at his core electorate, poorer Russians excluded from the economic boom, nationalist Liberal Democratic Party leader Vladimir Zhirinovsky played to the gallery with a trademark bombastic speech peppered with anti-Communist jokes and put-downs of Zyuganov.

Halfway through his speech, Zhirinovsky noticed a cup of tea on the lectern and demanded, to laughter from many deputies: "Who drank this tea? Zyuganov drank it. Get me another cup!"

After realizing that it had, in fact, been left by Putin during his speech, Zhirinovsky continued his tirade against the Communists. A Duma staff member soon brought out another cup.

After being interrupted several times by laughter from all parties' deputies, including the Communists, Zhirinovsky had his microphone switched off when his allotted time ran out. He continued speaking for another minute or so, then turned to Putin and Medvedev on the podium and cracked what appeared to be a final joke, prompting Putin to laugh and Medvedev, who had sat straight-faced throughout the speech, to finally break into a smile.

Emerging from the hall after the vote, United Russia Deputy Andrei Isayev praised Putin's social-spending plans. "The pie has been baked," he said. "The time has come to divide it up for the good of the people."

The number of votes cast for Putin's confirmation as prime minister by far outstripped that of Yevgeny Primakov, who held the previous Duma record with 315 votes in September 1998. Viktor Chernomyrdin garnered 314 votes in August 1996.

The vote was far higher than at Putin's first confirmation as prime minister in August 1999, when he collected just six votes more than the 226 he needed.

As prime minister, Putin will initially work from a temporary office on the fifth floor in the White House because the prime minister's office is undergoing renovations, his spokesman Dmitry Peskov said after Thursday's vote.

The renovation will last for some time, Peskov said.

Putin will retain his Novo-Ogaryovo residence outside Moscow and will likely hold some of his working meetings there, Peskov said.

But his other favorite residence, the Bocharov Ruchei estate on the Black Sea, will go to Medvedev, Peskov said. Putin is to receive another Black Sea residence.

Staff Writer Nadia Popova contributed to this report.