Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Premier Urges Special Duma Session




Saying there was no time to waste, Prime Minister Sergei Kiriyenko met Thursday with Communist leader Gennady Zyuganov to press for a special session of parliament that would consider legislation to shore up rickety government finances.


Zyuganov, whose Communists are the largest group in the State Duma, or lower house, emerged from the meeting and said "there is justification" for a special session next week, but that his staff was still studying the bills.


"If there are convincing arguments and authoritative opinions by the experts, I do not exclude that the Duma will agree" to convene, he said. But he said a final decision would wait until a meeting of Duma leadership Monday.


Speaker Gennady Seleznyov last week set tentative Aug. 19 and 20 dates for the session. But some deputies have advocated putting things off until the first week of September, saying they had inadequate notice to interrupt their summer break.


Seleznyov on Thursday said that the session was off unless the government gave more funding to the Duma, which -- like almost everything else that depends on the budget -- has not received its full appropriation.


"Because of the rigorous money-saving policy declared by the government, the State Duma is not even financially in a position to hold an extra session," Interfax quoted Seleznyov as saying.


The Finance Ministry has transferred 12 million rubles ($1.9 million) of a requested 70 million rubles, but "they should forget about an extra session until they release all the money," he said.


Kiriyenko, however, said Russia's financial condition left no room for delay.


"Introduction of the financial measures is possible only from the first of the month from a technical and accounting point of view," Kiriyenko told reporters. "If we pass the laws now, they go into effect Sept. 1."


"If however we pass them even on Sept. 1 or 2, they don't go into effect until Oct. 1."


If the Duma fails to act, the government has said it will enact the measures by presidential decree. That method's uncertain legality leaves the government's program open to court challenges, however.


The government proposes a package of 12 economic bills to try to close its yawning budget gap and convince skeptical foreign investors it is getting its fiscal house in order.


Among the bills are a 10 percent tax on cellular phone services, a tax on large cars and motorcycles, and a tax on veksels, or corporate IOUs often used as cash substitutes. It also wants to transfer 20 percent of income tax to the federal government. Currently, it all goes to regional governments.


The Duma passed only about a third of the government's requests at sessions in June and July, rejecting more sweeping reforms.


Several tax analysts said the measures did not constitute long-term tax reform, but simply attempts by the government to quickly tap pockets of cash in the economy. Financial markets have plunged as investors remain skeptical the government can continue to pay its debts without devaluing the ruble.


"The areas they've most recently identified are areas where they presume there should be cash there," said Alex Chmelev, tax partner with the law firm Baker & McKenzie. "So doing a tax on cars with large engines presumes anyone who owns that car has the wherewithal to pay that tax."


Chmelev warned that while such narrowly targeted taxes look good on paper, they are often costly to administer and bring in less revenue than expected.


Scott Antel, a tax lawyer with the Arthur Andersen accounting firm, said the government has no clear policy. "They are desperate and they're grabbing money every way they can."


Antel said the pressing need was for structural reform such as lower rates that would encourage more people to pay their taxes.


The government says the engine tax should bring in 4 billion rubles a year, while the cellular phone tax should bring in 1.4 billion rubles and the veksel tax 500 million rubles.