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. Last Updated: 07/27/2016

Business Brass Blast Spending, Tax Decrees

A group of senior Russian industrialists and businessmen Monday fiercely attacked recent presidential decrees on spending cuts and tax policy, describing the measures as unconstitutional and as violations of campaign promises that would retard the growth of Russia's economy.


"These decrees will have negative consequences on the development of Russian businesses and significantly threatens their confidence in tomorrow," Stanislav Smirnov, president of the Federal Chamber of Industry and Commerce, told a round-table meeting.


Smirnov was part of a significant delegation condemning in particular two decrees signed by President Boris Yeltsin last week, one canceling all non-budgeted spending from Sept. 1 and a second decree allowing the levying of taxes on individual bank transactions.


The presidential press service Monday sought to calm the firestorm over the tax decree, which has been disavowed even by the Finance Ministry. It was drafted as part of a package of government measures to boost desperately needed budget revenues.


"The measures may seem rather harsh but they will affect only a small group of citizens who receive high revenues and willingly avoid payment of taxes by using loopholes in tax regulations," said a statement reported by Interfax late Monday.


Bank operations regarding individual accounts would not be additionally taxed, the statement said, explaining that the decree was targeted at companies that transferred money to individual accounts to be converted into cash as a way of avoiding taxes.


Additional regulations are required before the decree can be implemented by the Finance Ministry and the State Tax Service and would be consistent with existing fiscal legislation, the press service said, according to Interfax.


Participants at the business meeting at the Russian Chamber of Commerce and Industry had said the tax measure was "illegal" because a presidential decree could not override existing tax law.


"The decree says that bank transactions and accounts will be liable to taxation 'according to the law,' but it is in itself against all our laws," said Sergei Lobanov, first vice president of the Union of Innovative Enterprises.


Other executives remembered a promise Yeltsin extended them at a Congress of Small and Medium Businesses in February, pledging the creation of a 150 billion ruble ($28.3 million) development fund in exchange for their support in the presidential elections. Such expenditure was suspended under at least next year under the decree on non-budget spending Yeltsin signed last week.


"'We will support you,' Yeltsin said," recalled Galina Ananina, president of the Russian Chamber of Artisans. "We are still waiting."


Yeltsin has in fact created an even more unfriendly environment for businesses to develop, Ananina said, adding: "He exhausted what was left of our confidence in his policy."


The participants at Monday's meeting signed a letter to Yeltsin urging him to review the content of the two decrees.