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Russia: New Tax May Fall Short Of Solving Military Budget Crisis

Moscow, 16 October 1996 (RFE/RL) -- Russian financial experts say that the Yeltsin administration's plan to introduce a new tax to help fund Russia's armed forces is unlikely to solve the military budget crisis.

Colonel Vladimir Gaidukov of the Defense Ministry's Budget and Finance Directorate tells our correspondent that the combined burden of federal and local levies already has become unbearable across Russia.

He says Russia is in an "extremely serious" crisis of failure to pay taxes.

"No new levy will bring any substantial amount of cash," he said.

The money is needed because the deficit-ridden Russian government owes the military billions of rubles for supplies, equipment and unpaid wages. News reports say even high-ranking officers, unpaid for months, are holding off hunger in their families by taking odd after-hours jobs or receiving allowances from home. The central government has promised to provide the needed appropriations, but its coffers fall far short of providing the required funds.

Gaidukov says that the state often assesses the equivalent of 90 cents on the dollar earned by corporate taxpayers, and says it is unreasonable to expect to collect more. He says the proposed new tax would amount to "shadow-boxing by the federal government."

Senior legislator Gennady Kulik, interviewed by our correspondent, agrees. He says taxpayers simply have no money to pay.

The proposal is to add a special levy of 2 percent to the nation's current 20 percent value added tax (VAT). Kulik, deputy chairman of the Duma's committee on budget, taxes, banks and finances, says the plan will only worsen the already severe tax collection problems.

Kulik says the new tax would precipitate a rise in prices, but wouldn't generate the hundreds of million dollars worth of rubles needed. A VAT is a kind of sales tax levied on goods and services at each production and marketing level.

Interfax news agency this week quotes Deputy Defense Minister Andrei Kokoshin as saying: "It will take us a lot of time to climb out of this hole."

Defense Ministry spokesman Lieutenant Colonel Vladimir Mukhin tells our correspondent: "Theoretically we should be glad to see such a tax imposed, but in reality we don't believe such a levy will help much."

Finance Minister Alexander Livschits said in a statement last week that the new tax might generate the equivalent of as much as $460 billion over the next two years. The Finance Ministry earlier said it has plans to improve VAT collection.