Belarus and Russia Develop Tax Systems

In order to create equal conditions for economic players on the territory of Belarus and Russia and promote efficient functioning of common free market zone, 10 years ago the parties signed a corresponding agreement which make provisions for the unification of tax legislation. The action programme, signed in 1999 by A.Lukashenko and B.Eltsin and aimed to realize the contractual provisions on the Union State formation, stipulates the adoption of the Tax Code of the Union State.

In order to create equal conditions for economic players on the territory of Belarus and Russia and promote efficient functioning of common free market zone, 10 years ago the parties signed a corresponding agreement which make provisions for the unification of tax legislation. The action programme, signed in 1999 by A.Lukashenko and B.Eltsin and aimed to realize the contractual provisions on the Union State formation, stipulates the adoption of the Tax Code of the Union State.

At present the experts of the two countries are continuing to work on implementation of these provisions, but at the same time they have to take into account the level of integration into common free market zone as well as specific character of national economies.

According to the Ministry on taxes-and-duties of Belarus, the working group on tax system simplification is considering the issue of abrogation of local special-purpose taxes (transport tax on renewal and restoration of public transport, tax on maintenance and service of city or region infrastructure) paid from income. In experts’ opinion, abrogation of these payments will increase the amount of profit left at organizations’ disposal and give extra opportunities for industrial and social development. Besides that, the issues of environmental tax payment simplification as well as the abrogation of duty for the republic support fund of growers and agrarian science are being looked into. These proposals will be introduced into draft legislative acts which provide for alterations and supplements to legislative acts on tax issues in 2009-2010.

Yet, in Belarus there are still no proposals to abrogate value-added tax and replace it by sales tax which is planned to be done in Russia. In the middle of February Dmitri Medvedev, Vice-Premier of Russia, stated that the primary task of Russian tax policy is to adopt the statute on transition to reduced rate of VAT and in future it is planned to be replaced by sales tax. Under his words, taxes should stimulate the production of deep processing natural resources as well as the development of research and engineering works.

This issue was discussed in Russia in 2006. Last September Arkadi Dvorkovich, Head of Expert Department of the President of the Russian Federation, stated that such step can be taken in 2009-2011 after some stages are passed. He noted that sales tax is better for Russia as far as VAT is not an ideal tax for raw materials economy, while sales tax can help Russia to diversify export.

Thus, tax policy of member countries of the Union State Establishing Treaty needs further concerted action in order to unify their legislations. At the same time, special attention which Russian and Belarusian authorities have recently given to the creation of common free market zone, carries conviction that the citizens of the two countries will, after all, see the new Tax Code of The Union State.