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. Last Updated: 07/27/2016

Yeltsin Acts To Speed Economic Reforms

President Boris Yeltsin on Wednesday urged his prime minister and leading lawmakers to form a special committee to speed up the adoption of a fast-expanding package of presidential decrees aimed at rescuing Russia's troubled economy. Meanwhile the president's top economic adviser, Alexander Livshits, said that six sweeping decrees issued by the Kremlin this week were "only the beginning" of a drive that would ultimately produce 100 new presidential orders on the economy. Yeltsin has asked Prime Minister Viktor Chernomyrdin, Duma speaker Anatoly Rybkin and Federation Council chairman Vladimir Shumeiko "to set up a working group" to accelerate the adoption of amendments he has proposed to the tax code in his decrees, Interfax reported presidential spokesman Vyacheslav Kostikov as saying. Yeltsin's proposals would reduce basic taxes on enterprises by 10 to 20 percent, provide a four-year tax break to companies with more than 30 percent foreign investment, cut export quotas and licenses and step up tax collection. The six decrees, if clarified and implemented, would represent a fundamental shift in economic policy that was welcomed by businessmen Wednesday. According to a top presidential adviser, this week's package is only the tip of an iceberg. Alexander Livshits, Yeltsin's top economic adviser, told the daily Nezavisimaya Gazeta that the total number of decrees Yeltsin would issue as part of his drive to save the economy could number 100 by the time he is finished. Kostikov said Yeltsin had sent a letter to the Duma and Federation Council in which he told legislators that he had instructed the government to submit draft bills based on the decrees to parliament. The presidential decrees would then remain valid until laws were adopted by parliament. Yeltsin's sudden attention to economic matters took many observers by surprise this week. But as the details of the president's proposals came to light Wednesday, foreign business executives in Moscow expressed cautious optimism. "Clearly it's a good solid message," said George Reese, managing partner of Ernst & Young in Moscow. "I see for the first time an attempt to link business interests to changes in the tax code." Previously, Reese explained, the government had set taxes simply with a view toward raising revenue. Significant in the latest Yeltsin decrees is the understanding that taxes have an impact on business activity, he said. "What that tells me is the government is listening," Reese said. "They are hearing the complaints of the business community and realize they have to get some of these things through the Duma." Ultimately, lower taxes could enable the government to enact further reductions because they would increase compliance and the tax base, Reese said."If they can increase compliance, they would not need these high rates to balance the budget," Reese said. Reese acknowledged, however, that the decrees "were probably more vague than most I've seen," indicating that a series of instructions and clarifications would probably be needed before the laws were understood. The government was also picking up the gauntlet from the president and was said to be preparing several new orders. First Deputy Finance Minister Andrei Vavilov said the cabinet was drafting a decree that would allow insolvent firms to be sold to any domestic or foreign buyer, Interfax reported. So far, the bankruptcy process in Russia has been little used for lack of clarity in the law and lack of political will to close the largest enterprises and increase unemployment. Vavilov acknowledged, however, that differences still existed among the document's authors over how to declare an enterprise bankrupt and sell state-run facilities. He also said customs duties on imports would be reduced by Oct. 1. Economics Minister Alexander Shokhin had said Tuesday that he expected Yeltsin to issue a decree that would cut in half the 30-ecu-per-ton oil export duty within a few days. While there was no word Wednesday on that decree, oil industry executives said they would welcome the tax break. "It seems to be a step in the right direction, but it's unclear what will come out of these decrees at this point so we're going to wait until we can analyse it properly," said Robert Tornstrom, president of Occidental Petroleum CIS.