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. Last Updated: 07/27/2016

Kasyanov: Cut Taxes to Boost GDP

Prime Minister Mikhail Kasyanov on Thursday urged his Cabinet to boost economic growth by slashing taxes and shifting the focus of the country's budget away from debt repayment.

"The government's aim should be to take the necessary steps in the short term to stimulate tax reform and to ease the tax burden," Kasyanov said in a statement on the government web site.

"Tax reform must become an efficient mechanism to help the economy," he told a Cabinet meeting on tax policy for 2004 and 2005. The plan under consideration proposes scrapping sales tax, unifying payroll tax and trimming value-added tax.

Over the past three years, Russia has lowered its income and profit taxes, reducing the overall burden by 3 percent of gross domestic product.

"That is not enough to achieve faster economic growth," the statement quoted Kasyanov as saying.

Russia is looking for ways to speed up economic growth to catch up with the West. GDP grew 4.2 percent last year after a 5 percent rise in 2001.

The Economic Development and Trade Ministry wants radical tax cuts. The Finance Ministry, however, is reluctant to use windfall oil revenues to fund a tax-cutting spree while the economy is still dependent on swings in global crude prices.

Every dollar fall in the price of a barrel of oil lops about $1 billion off Russia's revenues.

Kasyanov said a budget surplus reduction by 1 percent of GDP would allow the government to cut VAT by three percentage points. The government is planning to cut VAT to 15 percent to 17 percent from its current 20 percent in 2005.