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. Last Updated: 07/27/2016

Government Withdraws On Tax Plan

Combined Reports

The government appears to be backtracking on a controversial proposal in next year's draft budget that would tax yields on state securities.

Finance Minister Alexander Livshits told Interfax on Tuesday that plans to increase budget revenue would not rely on the proposed 15-percent levy, and indicated that the government would not fight for the measure in parliament.

"We understand many in the Duma are against this tax, and it is possible parliament will not approve the bill," he told the agency.

Livshits' comments followed remarks Friday by Central Bank Chairman Sergei Dubinin critical of the plan, which investors have said would result merely in driving up the price on the government securities.

"We view this as a negative decision," Dubinin told reporters. "Why should we pay from the budget to redeem the papers and then collect a tax on yields and return the money into the budget? I don't understand the meaning of this financial scheme."

He said the Central Bank did not support the Finance Ministry in its decision to introduce the tax on yields, and that the bank would soon explain its position on the issue to the State Duma budget committee.

Dubinin added that any tax, if imposed, would not be retroactive.

Although capital-gains taxes are levied on state securities in other countries, the bank chairman said Russia did not have enough buyers to effectively collect tax on the paper.

In another instance of shying away from announced policies, President Boris Yeltsin has given his government one week to bring to account and determine a punishment for officials responsible for preparing a decree, since rescinded, that would have taxed individuals' bank account transactions, presidential press secretary Sergei Yastrzhembsky told a news briefing Tuesday.

"Careless study of the paramount issues and a superficial approach to the preparation of serious decisions, without taking into consideration their possible consequences, led to the fact that the decree ... aroused a sharply negative reaction and harsh criticism from members of the public, banking and financial circles and the media," said a Yeltsin statement read by Yastrzhembsky.

The decree -- intended to combat tax evasion by firms using individuals' accounts to handle money -- has been cited as a reason for substantial withdrawals of private bank deposits after it was signed -- by Yeltsin -- on Aug. 18.

Yeltsin cancelled the decree Sept. 6, although revised measures to the same effect are included in the draft of the 1997 federal budget. ()