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Published: July 26th, 2016

A. Knyazeva ― Good afternoon, Anna Knyazev at the microphone, and with me in the studio, Konstantin Babkin, chairman of the Council of Chamber of Commerce for Industrial Development and competitiveness of the Russian economy. We'll talk on how to increase the efficiency of tax in Russia. And here perhaps worth recalling that the Council appeared not so long ago, I think in the spring, and already at the next meeting on 27 July it will focus on fiscal policy in Russia, and how you think, as I understand it, it is in Russia is far from ideal .

K. Babkin ― The aim of our Council for the next few months is to develop and issue, and present to public a program of economic development of the country, no more and no less. Today we publicly discussed Kudrin's program, which says that we should, in principle, continue what we have being doing for the last 25 years. There are Glazyev's and Titov's program, these two persons are close ideological. They say that we should print money and give them to certain companies on specific projects.

A. Knyazeva ― Well, this is the so-called Stolypin club. And you are an alternative.

K. Babkin ― Yes, we are for the alternative, we are not for the whites, not for the red, we will impose our own program. We do see that the country has great potential, we have everything for the development but the development nevertheless does not occur. But we do not like neither Kudrin's program, nor a program by Stolypin club. We have questions for both, so we must present our own. Solve the mystery, why have not we evolved yet, yes? Although we have everything.

A. Knyazeva ― Who is the member of the Council, and how do you intend to promote this problem, from the point of view, including the history of the tax?

K. Babkin ― The Council is formed on the basis of traditions of the Chamber of Commerce, composed of representatives of various industries, research institutions, enterprises, some well-known public figures, there are 30 people ...

A. Knyazeva ― Well, that is, you are a definitely force.

K. Babkin ― Well, chambers of commerce - it is like one of the most authoritative business associations, and here we are in the depths of her attempt to present such a program. So we have discussed changes in the external trade policy, concluded that the country at this stage has useful and reasonable protectionism, not mindless entry into the world market on the terms that we offer, is not it? And Kudrin says. "The introduction of global production chains, even on the sidelines" Here we are on the second role we did not agree, we believe that the need to build an independent process that if not a civilization, and its developed economy not sufficiently independent from the west, not the east. Though of course on the basis of cooperation with all countries that want to cooperate with us. We discussed protectionism, foreign trade policy, it is now a suitable time for tax policy.

A. Knyazeva ― What problems do you expect here?

K. Babkin ― Problems of ideological and factual. Well, ideological contradictions on existing tax policy is now the country's leaders on the one hand says that there is a need to develop non-raw material economy, the need to create 25 million jobs in the high-tech sector. But the ideology of the tax system is contrary to these objectives. The ideologists of the system are doing everything to gather with their point of view as much money from the economy, causing the least possible discontent in society. What if this happens with the economy, with the real sector, with manufacturing industries, it is not important for them. That is, they think that the higher the taxes, the more money in the budget. They do not care what happens to agriculture, with the cost of transportation, cost of furniture and cars. They introduce new taxes, Kudrin has canceled investment allowances, thereby reducing the sense of enterprises to invested in its development. The tax maneuver has being held, so called for a few years in stages, which leads to the fact that the raw materials in the domestic market becomes more expensive, more expensive energy, transportation becoming more expensive, increasing the cost of production in Russia. As a result, the state reduces their income because you can not live lavishly, if you have a sick economy, weak and inhibited.

A. Knyazeva ― General statistics of the World Bank in 2014, shows that the total share of taxes and charges, profit before tax in Russia is 47% in countries that belong to the Organization for Economic Cooperation and Development, this figure is not much higher than 41%. What does those figures say?

K. Babkin ― The fact that we have a high tax burden, but there are different grades. For example Shokhin had voiced that the Russian tax burden 57%. That is, we have manufactured and sold goods for 100 rubles, of which 57% took the state.

A. Knyazeva ― Including, perhaps, indirect taxes?

K. Babkin ― Well, everything, everything, everything, yes. Indirect, direct took the State. On the surface, there is an image of low taxes created in Russia. But if we get to the heart, watch reality, we see that taxes in Russia are much higher than in many developed and developing countries.

A. Knyazeva ― And I did not accidentally said about the indirect tax system that exist in our country. It is customs payments, any taxes on foreign trade, duplicate charging system with the motor transport. It led people on the road. Entrepreneurs began to be indignant.

K. Babkin ― Well, the system "Plato" is also here one of erroneous principles inherent in the tax system. We organized a Road Fund, collecting the road tax to keep the roads. We have a compulsory health insurance fund, which comes out to support the system of medical provision, is not it? But this principle of targeted collection of taxes developed countries, Western countries have declined about 200 years ago. The tax system should be structured so that the taxes are collected, but the way money is spent - this is the second thing that is not related to the process of collecting taxes. So it must be, and in a normal economy it works. Of course, you can levy taxes on the shipment process, but it does not mean that it is the amount we have to spend on maintenance of roads. The same with the pension fund. With each salary we are paying the pension fund, and the as ideologically laid down that the money we need to pay retirees. But these things should not be linked. Deposit to secure old age is a developed economy and numerous young people, able-bodied, well educated, talented. Therefore, if we want to ... Here we are people of the middle generation, have a secure old age, we should not delay a money in money-box, do not send it, especially to the West. The State must do everything to ensure that we had a developed economy. We must lower taxes ...

A. Knyazeva ― Did your workgroup counted to what extent the taxes needed to be reduced, and what specific taxes exactly?

K. Babkin ― We propose to change the ideology. Tax systems should be adapted in order to stimulate the economy. Therefore, we must return to investment allowances - it is the first step. What we need to do is to make it profitable to invest in the development of enterprises. Second. Do a Reverse tax maneuver. That is, to reduce taxes on production of raw materials, to cancel the excise tax on the extraction of tax resources, and increase the export duty on crude oil exports, the export of raw materials not refined from Russian. These things, in fact they are not so expensive. The state will lose 10 percent of its income in the first stage.

A. Knyazeva ― And what economic impact is expected then, and when?

K. Babkin ― Well, it is difficult to calculate. For that effect, it is not only due to a change in tax policy. I've emphasized that in order to trigger a new industrialization, a lot of changes needed: it is necessary to change the foreign trade policy, tax policy, in the field of raw materials trade policy, financial policies should definitely be changed, the money should be made cheaper. Policy in the field of education and science should be changed to do so, that science and education accelerated technological process. It is impossible to assess the impact of changes in tax policies only. It is necessary to assess the effect of the introduction of all these measures. It is a complex system, but I'd like give you one example. In agricultural machinery, where I work, the implementation of a part of our proposals on behalf of the Chamber of Commerce, in the field of agricultural engineering has led to the fact that for the second year we have double-digit growth in the industry. Last year, we rose to 48% this year to 25 still grow. We have a lot of work, and we can see that if you will continue to a reasonable state policy in the field of agriculture, in the field of agricultural engineering, then we still have many years of growth. Because we have fallen too low, we - the agricultural machinery, we - the Russian agriculture, we - all Russia's economy. We are in a very difficult situation, and we still have much to do to reach the level of developed countries. And our proposals are aimed at, to repeat, organizing this growth on the scale of the economy. That said, I believe that if our proposals are implemented, the entire Russian economy will grow for 20 years at a rate that will vary the double digits. 15% in the year will not surprise me.

A. Knyazeva ― You talked about tax incentives, and one of the measures, which operates in the economy this year - support for those who have invested in the modernization of production. As the Council on the development of entrepreneurship and competitiveness of the Chamber of Commerce appreciates the steps that can still be done in the framework of the tax reform proposed by you, and whether you are targeting a foreign experience, even here in the part of the investment incentives?

K. Babkin ― In the area of investment-benefits it does not necessarily rely solely on foreign experience. We had it in Russia, Primakov's government has introduced such a privilege, and immediately the growth started.

A. Knyazeva : Year 1998.

K. Babkin ― Well, the 98th, the 99th. This government lasted not long, only 9 months, but still his decision outlined there exit the country from crisis, 98-year, and even continued to grow for several years by inertia. Then came Kudrin, and in 2002 he canceled the investment-benefit and the growth slowed immediately, slowed investments and revenues to budgets began to fall, despite the high level of oil prices. So based on the experience of Russia, we have calculated, and came to the conclusion that the granting of investment incentives in the amount of 250 billion rubles, which is 50% of the income tax paid in the 15th year, for example, will increase the output of up to 2 trillion rubles in the first year. Thus, according to our estimates of 1 ruble benefits for income tax will bring the Russian economy 5 rubles of investments, and up to 8 rubles industrial production each year.

A. Knyazeva ― The sound of these figures are quite impressive, but there was another tax step taken by the authorities, the tax maneuver, it was held in 2014 for the oil industry, you've mentioned it already, the decrease in export duties by increasing (inaudible). Please comment here on pros and cons of this step.

K. Babkin ― I honestly do not know any pros, but the con lies in rising energy prices for the Russian producer. Increased cost of production of crude oil, petroleum, energy, rising energy prices, increasing the cost price of the entire production in our country. That is, we are reducing the purchasing power of the population, we are reducing the competitiveness of our manufacturing industries. At the same time we reduce the export duty on oil export, thus we further encourage the export of unprocessed raw materials from Russia.

A. Knyazeva ― What is the reverse tax maneuver, please tell us.

K. Babkin ― We should not raise the severance tax but excise tax on gasoline production. And it is necessary to reduce them, even reset. Extract oil - do not pay anything. But if you export oil from Russia, please pay the duty to the highest, perhaps will not even return the VAT on oil exports. Thus, we will encourage recycling of oil will encourage the entire economy, from oil to make products here. Its processed and consumed in Russia.

A. Knyazeva ― That is, we will organize a healthy economic chain.

K. Babkin ― Yes, we will try. Within the framework of the current legislation in the 15 th year, the oil industry has paid 2.5 trillion rubles of the tax on mineral extraction. 300 billion rubles fuel excise taxes, and 2 trillion rubles of export duties, a total of 5 trillion rubles. As part of the tax return to maneuver all of this amount it is proposed to pass on crude oil and oil exporters. To do this, raise the export duty on the specified products for 1200 rubles.

A. Knyazeva ― And how will we be treated by the major exporters after such a proposal?

K. Babkin ― Major exporters are the same oil companies. That is, with one hand, we have to take money by increasing duties with the other hand we give them money, reducing severance tax and excise duties. We do not pick up the money, we give them the work front. That is, we are expanding the market for them, and they will only be happy.

A. Knyazeva ― But we do see that there are many tax problems in our country, and in addition to the return of the investment incentives, and of the reverse tax maneuver, what other suggestions will the CCI put forward in the face of your council?

K. Babkin ― Pensions and other social commitments need to be paid out of current budget revenues. Pension Fund, Health Insurance Fund, to recognize as a structures that have no real meaning, dissolve, return the money to the budget. Funded system does not make sense in today's world. A pension must be paid by collecting taxes on developed and emerging economies. Spending on image projects, football and stuff like that cut draastically, comment seems to me it is not necessary, especially after the football championship. Simplify management accounting, unifying the balance and tax accounting. To make them compatible with international standards of financial reporting, and more by moving the record keeping in electronic form. Enter a progressive income tax that will enhance the perception of the society of the tax system as a fair system.

A. Knyazeva ― May I ask the question that always caused heated debate? Taxes on income, right? Individuals.

K. Babkin ― Yes.

A. Knyazeva ― There were quite a few pre-crisis and anti-crisis proposals which amounted to the fact that you have said, to raise taxes for individuals, to introduce a progressive scale. What ideas are more concrete at the Chamber of Commerce is, and do you agree that there will be no revolution after your suggestions?

K. Babkin ― We do not offer only to raise taxes, we suggest to reset the taxes for those who does not receive high salaries, up to 30 thousand rubles a month. Simply, they do not have to pay taxes. For those who receive from 30 up to 150 thousand rubles a month, they have to pay at the current level of about taxes, and for those who have more than 150 thousand rubles per month, well, they raise taxes by 5 per cent from the current level. Moreover, in the understanding that we are talking not only about the 13% income tax but contributions to the fund, to the pension fund and other deductions from payment. Rich people have to pay interest on the 5% in our opinion more than pay today. By myself I know that for me it would be a joy. And if I get in exchange the developing economy of Russia, if people perceive the tax system as a reasonable, adequate, will all pay taxes honestly, and much less will evade taxes, well, I'm ready to pay more as a percentage of my salary. As a result, I will get more. Because I will have many more opportunities to make money, like any other citizen of Russia. Assuming that there will be rapid economic growth in Russia. These are the main problems, well beyond where individuals themselves must annually file tax returns and pay taxes. That is, we have to the people...

A. Knyazeva ― Some responsibility. Yes? Fiscal instill.

K. Babkin ― Yes, instilling responsibility. The ability to communicate with the government to be more conscious citizens. This will be useful for the state, and this is not long but simple set of measures, together with other measures of economic development. I am sure, will lead to the rapid economic growth, which will last for many years.

A. Knyazeva ― The system of chambers of commerce around the world - it's still a serious lobby. It would therefore be interesting to know how you intend to communicate your views and suggestions and ideas to the authorities, is there any hope to be heard?

K. Babkin ― I do not know, the one who wants to hear can hear. One who does not will not. Therefore, we are addressing in the first place not to the government, but to millions of people, ordinary people, to whome we should explain in simple terms the enormous potential that we all have. The history teaches us that if millions of people understand something, and have something they want, then this something eventually will happen sooner or later. Therefore, we have little such zigzag path in power, We of course are addressing our proposals, but experience shows that very rarely they hear. Another way - is over the heads of millions of people.

A. Knyazeva ― British economist Adam Smith in his time identified several basic principles of taxation, and this is one of them. Let me quote, tax, whitch everyone are obliged to pay should be precisely defined, but not produced. The size of the tax, the time and manner of its payment, must be clear and known as the taxpayer himself or anyone else. And you know, that in this regard it seems to me that in addition to the level of taxes, advantage of federal taxes, some systems of complex statements, which operates in Russia, there is still a serious problem of lack of information, including tax breaks and tax incentives . So you agree with that?

K. Babkin ― Well, you know, I would not indiscriminately criticize the existing tax system. In principle, as a basis, it is normal. That is to say, the merit of existing authorities that they have created the tax system, and it is not so bad. Can it be reformed, that is, it is not necessary to destroy it to the end. There is a lot of work, it is necessary to improve and revitalize the ideology of it. In respect of too many taxes, well, maybe I would not agree that there is a problem. The fact that we do not know what taxes exist in Russia - well, I do not see such a significant problem here. In fact, it's hard to get the benefits - yes. I as an industrialist, when exporting from the state should return the VAT. But practice shows that within the tax authorities acting internal instruction, which encourages employees not to return VAT. Or return only through the courts, through there maximum red tape, eh? Thus, like as they fight for the interests of the budget. I know that I'm supposed to, but I put it very difficult to obtain today. So here, too, and of course customizing the operation of the system is necessary, it must be sharpened not out to collect as much money in the budget, and then could not care less. All the tax service, its ideology must be sharpened to support real production. Stitched blouse, tied up sweater, taking it abroad - immediately the staff of the tax service have to run after you and return you the VAT, that you have previously paid. Thus, they should benefit the state, they have to feel it. With respect, I want to phrase another quote Adam Smith, that thrive producing nations can not only sit on oil. You do not need gold to the state, when it is a simple product that it produces. And this ideology today, we must implement our economic policies to produce. And including tax policy.

A. Knyazeva ― The World Bank gave an overview on which the Russian economy will demonstrate the decline by 1.8% this year. Next year it will be able to go to economic growth, with the figures of 1.4% of GDP. What contribution to economic growth could make the tax changes proposed by the Council for the development of industry? Here is such a global issue finally.

K. Babkin ― Once again, I believe that our proposals are not as difficult to implementю A rapid growth will begin next year, interest in the country for 15 years. I know what You think, Anna, looking at me with those eyes: "well, that's a dreamer sitting". But we have agricultural machinery, look, there is such an increase, there is 40%.

A. Knyazeva ― Well, the tax system is a machine tax, and tax Giant. Your optimistic calculations, since the withdrawal in the light of the proposals and the moment when you are listening, and that something will change in the tax system. How much time will pass?

K. Babkin ― When they will heed? This is difficult for me to predict. It may take 1 month, it may take 5 years. I do not know when our ideas will be implemented.

A. Knyazeva ― Simply if the solution is on the surface, how can it be brought to people who are already at the highest level taking such tax measures, fiscal steps?

K. Babkin ― No, it is not difficult to bring it, on 27th we will talk on the issue, and a week later our tax proposals in a concise and intelligible form will be expound, and sent to the government in all instances. This is precisely the most simple, but if they hear? I do not know. Well, what once began to change in agricultural policy, to acquire a reasonable character somehow, it took me 12 years as the chairman of the industry association.

A. Knyazeva ― And then you say that you are an optimist. In our studio was Konstantin Babkin, chairman of the Chamber of Commerce Council on Industrial Development and competitiveness of the Russian economy. We talked about how to increase the efficiency of tax in our country. Ether held by Anna Knyazev, a director for the remote control was Natalia Selivanova.

Source: Echo of Moscow