Putin orders tax reforms

President Vladimir Putin today outlined economic goals for his second term, ordering his Cabinet to carry out a sweeping reform of Russia’s tax system in order to encourage economic growth and reduce poverty.

Putin, who won re-election by a landslide on Sunday, instructed the Cabinet to quickly work out a new tax regime for the nation’s oil companies that would bring a larger chunk of their profits into federal coffers.

Russia’s economy has been growing steadily over the past few years largely thanks to high world prices for oil, Russia’s main export commodity and top source of revenue.

Putin gave his Cabinet until the end of April to draft a new tax regime for oil and other extractive industries, but warned that it must be done cautiously so that it “doesn’t undermine the energy sector’s potential of growth”.

Putin said that the tax reform should help reduce the poverty level. “The nation needs an economic breakthrough,” he said in a speech to government officials, much of which was broadcast on state-run television.

Finance Minister Alexei Kudrin said that the new taxes on oil production and exports would bring several billion pounds of additional revenues to the government coffers if oil prices remain high.

Economics Minister German Gref said that Russia’s economy must grow by at least 5% each year to reduce poverty and implement costly and ambitious social reforms.

Putin – who has called for the gross domestic product to be doubled by 2012 - said, however that the government must plan annual growth of at least 7%.

“We must set more ambitious goals, then we will be certain to achieve more modest ones,” Putin said.

And when Gref said that the Cabinet was hoping to reduce the number of people living below the official poverty line of about €60 per month from 20% to 10-12% of the population, Putin sternly told him that it was obliged to do that.

“You must do that, so don’t be shy – say flatly that you will achieve this goal in three years,” Putin said.

Putin’s comments were in line with the image he cultivated throughout his first term of a stern leader taking bureaucrats to task.