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. Last Updated: 07/27/2016

Import-Export Tax Exemptions May Be Axed

In an effort to save money, President Boris Yeltsin is likely to cancel a series of tax exemptions granted to Russian exporters and importers, a ministry official said Wednesday.

Yeltsin on Sunday signed a decree ordering officials to review all tax and tariff exemptions in the next two months and decide which are warranted, said Lev Goryunov, deputy head of the economics department of the Foreign Trade Ministry. The different exemptions granted last year were estimated to have cost the government $2. 8 billion.

Goryunov said the government would most likely cancel the majority of exemptions that afford relief to exporters. If the exemptions are reversed, exporters will once again be required to sell half of their hard-currency earnings to the government. For many enterprises, import and export tariff exemptions will be replaced with a new system that allows payment to be deferred.

Goryunov said three different government ministries and various commissions that decide such exemptions would check to see whether enterprises really needed such privileges.

Enterprises are most often granted exemptions for restructuring and expansion, Goryunov said. Import tariff exemptions, for instance, make it more affordable for companies to buy foreign machinery and equipment.

Officials had said earlier this year that the government had given too many exemptions and privileges to Russian enterprises, mostly exemptions from import and export tariffs and from the requirement to sell 50 percent of hard-currency earnings to the government.

The Russian government has been looking for ways to recover hard-currency earnings from exports to pay off its mounting debt.

Yury Petrov, the deputy foreign trade minister, said earlier this year that import and export tariff exemptions alone had cost the Russian state $1 billion in 1992.

He criticized the president and ministers for granting too many exemptions to powerful industrial lobbies.

Goryunov said that, with the privileges under review, enterprises and regions with strong export industries would probably lobby hard to keep their privileges. He added that for many of the enterprises, such exemptions made up for the drop in subsidies. But many enterprises are still granted exemptions from value added tax on imported goods. Food and medicine are exempt from import duties and are subsidized in the form of a strongly beneficial exchange rate: they can buy U. S. dollars from the government for 20 rubles each, Izvestia reported.

Izvestia wrote that government-controlled imports and exports, still 50 to 60 percent of the total Russian trade, will keep their exemptions, but Goryunov denied the charge, saying the review would not differentiate between private and state enterprises.

Only a week ago, however, Yeltsin exempted the government oil and gas industry from the requirement to sell half of their hard-currency earnings to the state.