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. Last Updated: 07/27/2016

Minister Promises Tax Code by Feb. 1

A new version of Russia's draft tax code will be in the hands of parliament by Feb. 1, the finance minister promised Wednesday.

"This version has major changes," Mikhail Zadornov told reporters. He said taxpayers rights were better guarded, rates had been lowered and a number of instructions, crucial to the implementation of the code, had been included in the code itself.

The tax code, which the government and foreign investors see as crucial for economic growth and a normally functioning economy, has been modified in a number of drafts over several years.

Zadornov said he hoped the basic part of the new draft code could be passed by the State Duma, the lower house of parliament, in time to base the 1999 budget on it.

Zadornov said 1998 tax revenues could rise from last year's dismal levels because new tax collection measures, including hunting down unpaid customs duties on cars and air freight, could raise revenues by 20 billion rubles to 25 billion rubles ($3 billion to $4 billion).

"If it is 25 billion, that is a 10 to 15 percent increase in collection," he said.

But Russia would try to raise more cash, reducing mutual debt cancellation with taxpayers, which could bring down the total collection figures, he said.

Zadornov also announced that Russia will not tap foreign bond markets in the first quarter of the year or so, at least until world markets have calmed.

"As far as issuings go, we do not plan in the first quarter, at least in the first two months, to place a Eurobond," he said.

Zadornov said the government had abandoned a plan made late last year to take on a syndicated loan of up to $2 billion from a group of Western banks. "That is completely over," he said.

The finance minister said markets were key to Russia's ability to grow this year, although he said the economy could grow by as much as 1 percent to 2 percent. When rates come down, he said, banks will be able to lend to industry, which will be the stimulus the economy needs.

Zadornov said he expected Russian treasury bill rates, around 32 percent, to fall slowly in February and then faster in March and April, so that interest rates could be in the range of 16 percent to 18 percent by the end of the year.

But he said the government, which he said had agreed on a basic spending plan with the International Monetary Fund for 1998 during an IMF mission visit in December, would keep waiting to borrow until world markets stabilized.

"We have placed very conservative limits for the first quarter, based on one-twelfth of the budget as spent last year," he said. Russia and the IMF have agreed to revenue, spending and deficit targets based on the draft budget, he added.

"For January, we have held to these tough conditions. Thus we will limit our borrowing until we feel that conditions have changed inside and outside Russia," he said.

Zadornov said rating agencies such as Standard & Poor's, which downgraded its economic outlook for Russia in December, perhaps had been too optimistic earlier in 1997.

"It could be these organizations had expectations that were too high," he said. "Russia is a big, inert country, and changes cannot be made that quickly."