Prague, 4 November 1997 (RFE/RL) -- Economic issues affecting Eastern Europe are the subject of commentary in today's western press. Russia's tax troubles have leapt to news pages since Friday, when a team of experts from the International Monetary Fund (IMF) left Moscow saying that they could not recommend disbursement of the latest $700 billion loan tranche because Russia has, once again, failed to collect sufficient tax revenues.
WALL STREET JOURNAL: The root problem is the rotten tax system
The editorial says: "The last time the IMF closed its purse on account of Russia's poor tax receipts, the government sent out squads of commandos to crack down on tax offenders and promised bankruptcy proceedings. This time, the IMF's disapproval left the Kremlin scrambling to come up with new ways to shake taxes out of businesses whose ingenuity in the face of one of the world's worst tax regimes knows no bounds."
The newspaper continues: "Tax collection is often cited as the most serious problem the Russian economy faces. At 46 percent of target revenues so far this year, something is clearly wrong. At around 10 percent of GDP, tax receipts in Russia are far below U.S. or British standards. This has exacerbated public sector wage arrears and strained the budget, in turn increasing the government's borrowing requirement. No doubt, better organized collection and more sophisticated use of computerized records would help improve this picture, as would forcing big league tax delinquents to pay their arrears. But none of these measures gets at the root problem which, as anyone doing business in Russia knows, is the rotten tax system."
The paper endorses a simplified system with reduced tax rates in order to bring in payments from Russia's black economy, which is estimated to be as large as 50 percent of GDP. The editorial says: "A rational tax regime would also remove a major obstacle to foreign investment." But a long-term solution to Russia's tax problems is likely to be pushed aside in favor of steps that boost revenues in the short term. The editorial concludes: "With the IMF and the Communist-dominated Duma both pressing for more tax receipts, there is the danger that the tax reform so critical to a prosperous Russia -- and to encouraging respect for government and compliance with the law-- will be sacrificed at the alter of higher revenues."
DAILY TELEGRAPH: Russia will soon have more riot troops than military
Alan Philps, the Moscow correspondent, writes an analysis piece today examining how the tax revenue problem is exacerbating what he says is a potential threat to President Boris Yeltsin's tenure -- disaffection in the military about unpaid wages.
Philps writes that dissident General Rev Rokhlin "still sees a chance for the angry soldiery to force President Yeltsin to quit... calling for the military to gather its strength and take to the streets in February in a huge protest. General Rokhlin says Russia's ground forces are now little bigger than the Interior Ministry troops, whose task is to put down riots and rebellions and act as counterweight to the disgruntled army. Since the ground forces are to be slashed in half, Russia will soon have a situation where it has more riot troops than military."
Philps concludes that the government is "eager to silence" General Rokhlin and his supporters. He writes: "The Kremlin's strategy is to keep the officer corps on the edge of survival, forcing them to moonlight as taxi-drivers, security guards and market stallholders. They should be too busy making ends meet, and too exhausted and demoralized, to join any protest."
FRANKFURTER ALLGEMEINE ZEITUNG: Share investors in Eastern Europe were also hit
The paper publishes today an unsigned analysis about the effects of volatile international capital markets on Eastern Europe's bourses. The newspaper notes that "the mood concerning further developments is not very optimistic. Further losses on the stock exchanges of the United States, Europe and Asia could lead investors in Eastern Europe to dump their shares. That's because (eastern stock markets) are considered to be more risky, and were (already) thought to be the biggest winners of the year by a long way."
The newspaper says: "Share investors in Eastern Europe also were hit in the last week partly because (eastern bourses) are interlinked with the international capital markets. Some investors consider the losses in Eastern Europe as an opportunity to buy. Afterall, the prices apparently are much more favorable than they have been for months. Although they saw losses in their portfolios, they again set out on a shopping tour. Some people are optimistic and trust that the market will recover, but the only thing that has really changed are the prospects of other markets. In Russia, the economy is in better shape than at the beginning of the reform process, and the first signs of (GDP) growth are now being seen. But if the markets in Asia, Europe and the United States continue to decline, then this (growth) will have little effect (on eastern bourses). When things go from bad to worse, then nobody is immune."
INDEPENDENT: The conference may reduce the risk of aspiring nations feeling snubbed
Alan Murdoch reports on the role of Britain when it holds the EU presidency next year, and a conference that the government has promised to host for countries aspiring to EU membership. Murdoch says: "All applicants for membership will be invited. The conference would reduce the risk of those not being admitted to the EU feeling snubbed." Murdoch also notes that Britain's EU presidency "will involve overseeing which countries qualify for the third stage of economic and monetary union." He quotes Foreign Secretary Robin Cook as saying that "Britain's delayed EMU entry timetable could be an advantage by giving the EU presidency an 'impartial' chair."