Between now and the June presidential elections, the State Duma will attempt little in terms of concrete law-making.
But there is at least one major piece of legislation firmly on the agenda that is of considerable importance to domestic and foreign businesses alike.
The first part of Russia's new tax code, approved by the government in December 1995, will soon come under the Duma's hammer. Those betting on its arrival may want to take a seat.
The aims of the tax code are both microeconomic and macroeconomic.
The draft legislation is designed to improve the fiscal picture by increasing total revenue -- the macroeconomic angle. This legislation aims to end the current reliance on value-added and profits taxes, moving instead to tax income and property. The revenue burden will then shift away from the beleaguered corporate sector toward individuals.
The code is the embodiment of textbook liberal economics -- the best way to increase revenues is to lower tax rates and widen the base.
Moreover, it addresses some major imbalances in Russia's current revenue intake: In 1995, profits tax in Russia accounted for 26 percent of all revenues, compared with an average in the Organization for Economic Cooperation and Development of 7 percent. A mere 8 percent of Russian revenues came from income tax -- in the OECD it was nearer 30 percent.
Microeconomics is about individual and firm-level analysis. In this realm, the code aims to make life easier for all those attempting to do business in these parts. Russia's tax rules are vague, yet, still manage to be self-contradictory.
Executives of all nationalities have nightmares about the State Taxation Service's hazing tactics -- "it's all wrong, your accounts are all wrong."
Paying tax in Russia involves doing the books once, then doing them again, while racing a daily late-payments fine of 0.7 percent.
The new code reduces the number of taxes from 150 to about 30. It introduces funny new ideas like tax courts, the separation of tax and accounting records and tax confidentiality. Specifically, late payment penalties will fall, and the authorities will have to redeem interest on taxes levied in error. All these changes are welcome and overdue. The problem is, they might not happen.
One positive sign is that Yabloko's ever-sensible fiscal guru -- Mikhail Zadornov -- is still chairman of the Duma's Budget, Banking, Taxation and Finance Committee.
As long as Zadornov can downplay the increased burden the code places on individuals -- the narod -- he should be able to sell the Communists a "more-revenue-for-social-programs" dummy when presenting the bill to the lower house.
The problem is, though, that the code reins in the ability of Russia's regions to levy taxes. In 1992, the regions collected only 36 percent of all revenues. In Russia's 1993 tax chaos, though, they had a field day, grabbing 58 percent.
Since then, the federal authorities have regained some control -- the regional share fell to 51 percent in 1994 and 48 percent last year.
The new code finally snaps the regional apparatchiks out of their tax fantasies, imposing national uniform standards.
Even if the Communists allow the code to pass through the Duma, it could easily fall foul of the Federation Council. Composed of regional heavies, the upper house will see the code as a straitjacket on their ability to set local taxes.
Direct investors in Russia -- many of whom, once they have shelled out on a factory, are at the mercy of local tax barons -- are desperate for the code to become law. But, if the Federation Council says no, so be it.
An upper house rejection means the code can only get to President Boris Yeltsin's desk if two-thirds of the Duma -- 300 deputies -- say so. But Zadornov may not be able to muster two-thirds.
In the last months, a new Duma deputy group has sprung up -- representing Russia's regions -- which should be seen as the Duma's Federation Council.
This new group controls 10 percent of the seats, as many as Yabloko, and if it strikes a deal with Communist leader Gennady Zyuganov, the tax code will falter. Even if it doesn't there could be problems.
Physically finding the necessary 300 deputies to carry the code will not be easy during the upcoming election madness.
But there is at least one major piece of legislation firmly on the agenda that is of considerable importance to domestic and foreign businesses alike.
The first part of Russia's new tax code, approved by the government in December 1995, will soon come under the Duma's hammer. Those betting on its arrival may want to take a seat.
The aims of the tax code are both microeconomic and macroeconomic.
The draft legislation is designed to improve the fiscal picture by increasing total revenue -- the macroeconomic angle. This legislation aims to end the current reliance on value-added and profits taxes, moving instead to tax income and property. The revenue burden will then shift away from the beleaguered corporate sector toward individuals.
The code is the embodiment of textbook liberal economics -- the best way to increase revenues is to lower tax rates and widen the base.
Moreover, it addresses some major imbalances in Russia's current revenue intake: In 1995, profits tax in Russia accounted for 26 percent of all revenues, compared with an average in the Organization for Economic Cooperation and Development of 7 percent. A mere 8 percent of Russian revenues came from income tax -- in the OECD it was nearer 30 percent.
Microeconomics is about individual and firm-level analysis. In this realm, the code aims to make life easier for all those attempting to do business in these parts. Russia's tax rules are vague, yet, still manage to be self-contradictory.
Executives of all nationalities have nightmares about the State Taxation Service's hazing tactics -- "it's all wrong, your accounts are all wrong."
Paying tax in Russia involves doing the books once, then doing them again, while racing a daily late-payments fine of 0.7 percent.
The new code reduces the number of taxes from 150 to about 30. It introduces funny new ideas like tax courts, the separation of tax and accounting records and tax confidentiality. Specifically, late payment penalties will fall, and the authorities will have to redeem interest on taxes levied in error. All these changes are welcome and overdue. The problem is, they might not happen.
One positive sign is that Yabloko's ever-sensible fiscal guru -- Mikhail Zadornov -- is still chairman of the Duma's Budget, Banking, Taxation and Finance Committee.
As long as Zadornov can downplay the increased burden the code places on individuals -- the narod -- he should be able to sell the Communists a "more-revenue-for-social-programs" dummy when presenting the bill to the lower house.
The problem is, though, that the code reins in the ability of Russia's regions to levy taxes. In 1992, the regions collected only 36 percent of all revenues. In Russia's 1993 tax chaos, though, they had a field day, grabbing 58 percent.
Since then, the federal authorities have regained some control -- the regional share fell to 51 percent in 1994 and 48 percent last year.
The new code finally snaps the regional apparatchiks out of their tax fantasies, imposing national uniform standards.
Even if the Communists allow the code to pass through the Duma, it could easily fall foul of the Federation Council. Composed of regional heavies, the upper house will see the code as a straitjacket on their ability to set local taxes.
Direct investors in Russia -- many of whom, once they have shelled out on a factory, are at the mercy of local tax barons -- are desperate for the code to become law. But, if the Federation Council says no, so be it.
An upper house rejection means the code can only get to President Boris Yeltsin's desk if two-thirds of the Duma -- 300 deputies -- say so. But Zadornov may not be able to muster two-thirds.
In the last months, a new Duma deputy group has sprung up -- representing Russia's regions -- which should be seen as the Duma's Federation Council.
This new group controls 10 percent of the seats, as many as Yabloko, and if it strikes a deal with Communist leader Gennady Zyuganov, the tax code will falter. Even if it doesn't there could be problems.
Physically finding the necessary 300 deputies to carry the code will not be easy during the upcoming election madness.
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