I thought that, whatever Putin might or might not be, he would at least be ready, willing, and able to collect taxes, though at lower rates. Why is the state still broke? Are the rates too low? Too much avoidance and evasion?
What do you think of the article below?
***** #12 - JRL 6594 MOSCOW TRIBUNE 11 December 2000 RUSSIAN ECONOMY AT YEAR END Results and outlook By Stanislav Menshikov
...Instead of pump-priming the government chose tax incentives. The two large reforms in this area were setting a flat tax rate on personal incomes and lowering the tax rate on profits. The first measure helped bring part of hidden incomes "out of the shadow" and helped raise tax collection but failed to increase total spending for personal consumption. The second measure led companies to cut capital investment since they could no longer deduct investment expenditures from profits for tax purposes. Tax collection on this item fell by 20 percent in 2002 because companies chose to reduce reported profits. The net effect on economic growth was clearly negative.
New suggested reforms such as reducing the Unified Social Tax (UST) from 37.5 to 32 percent and the Value-Added Tax (VAT) from 20 to 16 percent are being postponed until 2004 or 2005 for fear that they would further destabilise the budget.
As a result, growth rates in capital investment have fallen from 17 percent in 2000 to 7 percent in 2001 and only 2.5 percent in 2002. They are now growing substantially slower than GDP. This is undermining further economic growth because productive capacity is stagnant, decaying and outdated. It is also reducing growth in aggregate demand and undermining competitive power of domestic industries. Weak investment is the principal Achilles' heel of the Russian economy....
<http://www.cdi.org/russia/johnson/6594-12.cfm> ***** -- Yoshie
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