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. Last Updated: 07/27/2016

Yeltsin Turns Down Oil, Currency Taxes




Russia's Finance Ministry said Monday that President Boris Yeltsin had cost state coffers billions of rubles by vetoing bills to tax oil transportation and hard currency purchases.


"We are simply astonished and shocked," First Deputy Finance Minister Vladimir Petrov said at a news conference, estimating the state would lose 3.3 billion redenominated rubles ($550 million) as a result of the vetoes.


Yeltsin on Sunday signed into law huge tax increases on the import, distillation and sale of alcohol, but he vetoed amendments to the law that raised the tax on hard currency purchases to 1 percent from the current 0.5 percent. He also vetoed a bill on oil transportation taxation that would have levied 3.80 rubles per 1,000 kilometers per ton. Oil transportation is not taxed in Russia.


"The president of the Russian Federation thinks the mentioned federal laws do not comply with the legislation of the Russian Federation in full," the presidential press service said in a statement.


When asked how the government planned to compensate for the loss, Petrov answered, "Ask something easier."


Russia could make up for the loss by hiking oil excises, said Alexander Zhukov, the acting head of the State Duma lower house of parliament budget committee.


The oil transportation tax would have hit oil producers hard since they have to ship oil for long distances for export and refining. Oil executives and the Russian media have criticized the proposed tax on oil transportation, arguing that the industry is struggling under the weight of excessive taxation already.


The tax on hard currency purchases applies primarily to kiosk operations by individuals.


The two bills that Yeltsin vetoed were among about a dozen laws the government submitted to the parliament to boost 1998 budget revenues. Critics have charged that the package of bills, by raising taxes, would add to the government's difficulties in collecting taxes.


The law on alcohol signed by Yeltsin raises the price of an import license by 15times to 83,500 rubles ($14,000). A license to distill, bottle, stock and sell alcohol is now 41,750 rubles ($6,958).


The Duma passed a law last October strengthening state control on wholesale sales of pure alcohol and drinks containing 12 percent or more alcohol.


Yeltsin said in September the tighter controls were aimed at stopping bootleg alcohol and increasing tax revenue.


Experts say contraband alcohol from pirate distilleries accounts for more than half the Russian alcohol market. Russians are among the world's heaviest drinkers, downing 14.5 liters of pure alcohol per capita -- about 170 half-liter bottles -- per year.