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. Last Updated: 07/27/2016

Loopholes Closed On Import Tariffs

The government revised tariffs on imports of television sets, videocassette recorders and poultry as of Tuesday as part of a broad attempt to overhaul the customs system.

"The idea is to close the loopholes used to import one type of goods under the cover of another," said Alexei Savinkov, spokesman for the State Customs Committee, on Tuesday.

Import duties on poultry were lowered from 30 percent to 25 percent, but must be no less than 0.2 euros (18 cents) per kilogram; duties on television sets remained at 20 percent to 30 percent, but the lowest levy per unit was lowered about 30 percent.

The Cabinet is scheduled to meet Sept. 7 to discuss a reform of the customs system, including introduction of a four-tier grid instead of an existing complicated seven-grade scale.

Separately, Deputy Prime Minister Alexei Kudrin said Tuesday that customs accounts, which are now held by commercial banks, will be transferred to the State Treasury by November.

Accounts of the Central and Northwestern Customs, which account for 50 percent of total customs payments, will be transferred from MDM Bank, Rosbank, Alfa Bank and Baltuneximbank by mid-October this year, said Kudrin.

The major idea underlying the government?s move to introduce new duties on poultry and electric appliances this week is to improve collection of duties, closing existing loopholes in the legislation without making broad changes to the way in which customs work.

"Today?s changes will have administrative impact only and are not intended to revamp the major principles of the customs policy," said Igor Yusin, head the division of the Ministry of Economic Development and Trade that is to submit the draft proposal to the government in September. "These major issues will be discussed in September."

Many private businesses importing goods have been registering them with the customs committee under different categories to pay lower customs tariffs.

"Such practices will continue until the government decides to put an end to them," said Alexander Milyavsky, board member with Moscow-based television manufacturer Rubin, which was the first local company to restart production in 1997.

Local production of television sets fell more than 10 times to a meager 317,000 last year, down from a peak of 4.8 million in 1985.

Most independent market surveys show that 9 out of 10 imported televisions sets enter the country under tax-avoiding schemes.

"I think the real figure is 10 out of 10," said Milyavsky.

Until Tuesday, importers of poultry had to pay 5 percent to 30 percent import duties, depending on the type of imported meat. Importers of chicken legs will now pay 25 percent instead of 30 percent.

The government started to lower duties charged on imported poultry in spring this year, effectively bringing taxes down to about half of the value of the goods from more than 100 percent. One ton of poultry fetches $500 on foreign markets.

"It looks like they are making small adjustments, moving in the right direction," said Pavel Anfalov, general director of major chicken-meat importer Soyuzkontrakt. "I hope this is the last in a string of changes because the market needs to readjust every time regulations change."

Meat producers said that introduction of one duty on imports of all kinds of meat will not have a drastic effect on their operations.

"But if the government simplifies the customs system, we might consider buying meat on foreign markets ourselves," said a Moscow-based meat factory official, who declined to be named. "So far, we have left such operations to wholesalers."

Many meat producers switched to local and Ukrainian supplies after the 1998 ruble devaluation.

For example, the Campomos factory increased the local share of its meat supplies to 90 percent from about 10 percent two years ago.

The government?s decision to revamp the customs system could have a major effect on textile makers and the automobile industry, both of which benefit from prohibitive import duties.

But even though duties will be lowered on several categories of goods, government economists expect revenues to grow.

Alexander Kushnarenko, a department head with the Economic Development and Trade Ministry, said earlier this week in an interview with Vremya Novostei newspaper that lowering customs duties on poultry by 10 percent usually increases customs revenues by 20 percent and vice versa.

Preliminary estimates made by the ministry show that revenues from customs duties would grow 20 percent from the current level of $7.6 billion a year, about a third of the government?s total revenues, after the customs reform is carried out.