Russian Deputy Minister of Economic Development and Trade Andrey Sharonov
Photo: Dmitry Dukhanin
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Climate without Control
// Deputies make recommendations to the administration
Business and Power
On Monday, parliamentary hearings “On the Condition of the Russian Economy and Legislative Measures to Provide for Its Development,” organized by the Committee on Economic Policy, were held in the State Duma. The participants made recommendations to the administration on increasing economic growth. Deputy Minister of Economic Development and Trade Andrey Sharonov distinguished himself with his radicalism there.
First Sharonov told participants in the hearings about the outcome of 2004. He did not emphasize, as presidential adviser Andrey Illarionov did, that it had been a critical year because of YUKOS. However, about the same thing could be gathered from what he did say. Sharonov in effective claimed that the cause of the slowdown in economic growth was the unpredictable policy of the authorities toward business. As long as that remains a source of uncertainty, as long as the partnership between business and power remains strained, the best programs and the best laws won't help.
Sharonov stated that the outflow of capital from Russia in 2004 increased fourfold to $8 billion. And, even while September say a pure inflow in the private sector, contrary to predictions, that didn't help the situation. “There's a problem with improving the entrepreneurial investment climate. There's a problem with business's confidence in the authorities,” he said. “Business's wariness of the authorities' policies is continuing. It is reflected in the slowing of the pace of growth of investment demand.” He went on to say outright that the worsening investment climate was caused by the YUKOS case and “unpredictable tax claims against a number of companies.” Investors are afraid to make investments, especially long-term ones. That fear on the part of Russian investors is “a signal for foreign investors.”
Sharonov was supported by United Russia Deputy Anatoly Aksakov. While speaking of the importance of state policy toward the financial markets, small business and long-term reduction of VAT to ensure economic growth, he nonetheless called “restoration of confidence between the authorities and business and a halt to the excesses of the tax system” the main measures necessary. He even suggested a tax amnesty “to draw a line under privatization and take away the Damocles Sword of the audit from business.”
Kommersant tried to get further clarification from Sharonov on how the government intends to restore confidence between the authorities and business, how it is possible to fight the unpredictability of tax claims and how to turn the outflow of capital into an inflow. “There should be some definition of the powers of the tax service – how often they can make an audit. There have to be time limits for tax claims and privatization deals,” he explained. “Honest investors don't want a skeleton in the closet.” He said that the Ministries of Economic Development and of Finance are already holding consultations with the tax service on reducing the number of audits, reducing time limits on tax claims (now it is three years for tax payments and ten years for privatization deals). He also said that Russian tax legislation very poorly fulfills the norm that doubts about tax debt are to be decided in favor of the taxpayer. The government will try to deal with that issue as well.
At the hearing, deputies decided on a multitude of recommendations to the government to speed up economic growth and correct middle-term programs. In particular, participants in the hearing urged an active state economic policy to carry out structural reforms and raise the competitiveness of the economy to ensure a high and stable economic growth rate and a rising standard of living. For that to happen, it was suggested that a middle-term program be developed with detailed mechanisms for structural reforms in industry with the aim of diversification and “a growth in production output with a large measure of added cost.” It is also recommended that the government increase the effectiveness of the mechanism to enforce laws in the economic sphere; to adopt a concept of industrial policy and a strategy for the development of the real sector of the economy; and to provide additional state support for production that can replace imports, for investment and innovation in the real sector, and for production of finished products for export, including those made by small and medium-sized businesses. The government has also been given a list of laws to develop: on state forecasts and socio-economic development, on statistical accounts, on the basics of a pricing policy, on the development of small and mid-sized businesses and on the development of special economic zones and technical parks.
The Consumer Price Index and Change in the Official Exchange Rates of Foreign Currencies against the Ruble
Irina Granik
All the Article in Russian as of Feb. 08, 2005
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