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. Last Updated: 07/27/2016

Kudrin: New Tax Plan Will Save Firms $7Bln

VedomostiFinance Minister Alexei Kudrin
Finance Minister Alexei Kudrin said Monday that new tax proposals approved by the government last week will cut companies' tax burden by $7 billion per year.

The proposals, which will simplify the collection of value-added tax and speed up refunds to exporters, would cost the government $5 billion less than an alternative plan proposed by Prime Minister Mikhail Fradkov, which envisaged slashing the VAT rate to 13 percent from 18 percent.

The changes will also allow companies to write off 10 percent of equipment purchases as operating expenses, thus reducing their corporate profit tax bill, Kudrin said in an interview published Monday in Kommersant.

A Cabinet rift between liberal economists and Fradkov appeared to have been healed on Friday when Kudrin announced that an agreement had been reached to keep VAT at 18 percent.

Fradkov's plan would have meant the VAT cuts would have needed to be funded to the tune of some $12 billion from a special stabilization fund created to insulate the country against oil price fluctuations.

"We have avoided a number of abrupt decisions connected with the decrease of a number of taxes, even though we believe such decisions would be right," Fradkov said at President Vladimir Putin's regular Monday meeting with the Cabinet, Itar-Tass reported.

In an apparent tradeoff, Kudrin announced that the price threshold per barrel of oil after which export duties and tax are contributed to the special stabilization fund will rise from $20 per barrel to $23 per barrel. Economists say the move will pump an extra $6 billion into the budget.