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Russia Reform Monitor - No. 2125
Rethinking Russia's tax code;
Regions rail against the federal center
Edited by Amanda Azinheira, Kaitlyn Johnson and Garrett Lynch
March 30, 2017
Russia's Finance Ministry, Economic Development Ministry, and the government-connected Center for Strategic Research (CSR) are actively developing reform proposals that could lead to the introduction of a more progressive tax system, replacing Russia's current flat income tax rate. According to The Moscow Times, the proposed legislation would raise both the personal income tax and the value-added tax (VAT), which would allow income below a minimum threshold to be non-taxable, a welcome development for the growing poor within Russian society. The new movement comes in the wake of President Putin's call, back in December, for reform of the country's tax system in order to boost growth in a largely-stagnant economy. The proposal, however, is still in its infancy, and has yet to be presented to the President.
Vladimir Milov, a leader of the Russian opposition party "Democratic Choice," is organizing an march in coming days to commemorate government critic and former Deputy Prime Minister Boris Nemtsov, who was shot dead outside the Kremlin in February of 2015. According to Radio Free Europe/Radio Liberty, the governmental response has not been long in coming; Milov has already received an official warning from Moscow prosecutors that he may face administrative or even criminal charges should the march incite "social enmity" or "public disorder." Previous marches commemorating Nemtsov have faced a similar backlash from both government officials and Kremlin supporters.
Fraying relations between Moscow and Russia's regional governments are posing a growing challenge to Russian President Vladimir Putin's grip on power. The Washington Post reports that, amid widespread economic hardship and heightened competition over their share of a shrinking federal budget, the country's governors are increasingly beginning to speak out publicly against the president. Exacerbating the problem, new federal legislation is forcing already cash-strapped regions to spend still more, even as economic support from the Kremlin has declined. The resulting local pressure has generated growing discontent and prompted heightened grassroots activism — an unwelcome development for Putin leading up to 2018 elections.
Thousands have marched in Moscow to commemorate slain political opposition leader and former Deputy Prime Minister Boris Nemtsov. According to Radio Free Europe/Radio Liberty, the march in Russia's capitol - which was mirrored by similar marches in St. Petersburg and Nemtsov's hometown of Nizhny Novgorod - went off without any major incident. Aside from mourning the loss of the country's leading Kremlin critic, many attendees used the occasion to protest issues such as governmental corruption, political repression, and Russia's involvement in the ongoing war in eastern Ukraine.
The self-proclaimed Luhansk People's Republic, a breakaway region in eastern Ukraine, has declared that it will formally adopt the Russian ruble as its official currency. The separatist government of Luhansk, which already uses the ruble alongside the Ukrainian hryvnia, asserted that the measure was adopted in order to stabilize Luhansk's volatile local economy. But, notes The Moscow Times, the move is in step with other integrationist policies promoted by the Kremlin (such as the Russian government's recent decision to recognize documents issued by the separatist governments in eastern Ukraine).
According to the New York Times, former Utah governor and ambassador to China Jon Huntsman is under consideration by the Trump administration to be the next ambassador to Russia. While Huntsman does not claim to have any expertise in Russian affairs, experts have asserted that his experience with "complicated relationships" such as the one between Washington and Beijing would serve him well in Moscow. Huntsman has been outspoken about his criticism of President Putin and of Russia's foreign policy in general. As a result, many believe he would maintain a hard line stance in dealing with the Kremlin if he becomes Washington's envoy to Moscow.