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TAX ON SALES MAY BE IMPLEMENTED IN RUSSIAIn March 2007, the government will have to make a decision on replacement of the value-added tax (VAT) with the tax on sales (TOS). Otherwise the Duma will be unable to prepare a three-year budget. Arkady Dvorkovich, director of the presidential expert department, announced this on November 29. Businessmen agree with the idea of tax replacement whereas the Finance Ministry refuses even to discuss such prospect.
Before the upcoming changes to the tax laws all agencies concerned need to calculate consequences from the novelty and to work out proposals for reforming the VAT coordinated with the business community. Dvorkovich announced this on November 29. According to him, the government plans to submit the draft federal budget for three years at once between the end of April and beginning of May 2007. If the final decision is not made until April, the radical tax reforms will be frozen at least for three years.
The Presidential Administration is working out proposals for substitution of the VAT with the TOS. According to Dvorkovich, in the future the VAT will lose its role for the budget system, whereas the problems of its administration will only grow. According to experts, now demands of VAT compensation reach 90% of the sum of its payment. Dvorkovich presumes, “Improvement of administration will hardly compensate for problems of illegal compensation for the VAT.” Sergei Belyakov, deputy chair of the budget and tax policy committee of the Russian Union of Industrialists and Entrepreneurs, agrees with him, “The VAT is very costly for the state and for business and now 100% of businessmen achieve compensation for it through the court.”
The representative of business proposes calculation of the effect from VAT replacement with the TOS first of all. Meanwhile, the presidential expert department has already calculated that even if the TOS is collected only by 65%, losses to the budget will amount to 1.2% of the GDP, which is comparable to the lost revenues of the treasury in case of lowering the VAT from 18% to 13% on which Prime Minister Mikhail Fradkov insists. Dvorkovich objects, “It is possible to easily compensate for the losses with the accumulated reserves and further growth in the economy.”
Vladislav Korochkin, Vice President of Opora Rossii, says, “VAT is a huge step forward.” In any case, according to him, it is more expedient to substitute the VAT with the tax on turnover amounting to 1%, “which is absolutely not burdensome for all sectors” but would force businessmen to optimize business. Stanislav Voskresensky, expert of the presidential expert department, warns, “The tax on turnover discriminates against less profitable sectors.” Besides the VAT, the unified social tax (UST) may be reformed seriously too. According to Dvorkovich, the burden on the payroll fund turns out to be excessive for priority industries. In any case, it will not be difficult to reach an agreement on the UST because associations of businessmen have already worked out a uniform simple stance regarding this tax and believe that it is necessary to lower it. Belyakov adds, “It is also necessary to divide the UST into tax payment and contributions to the Pension Fund of Russia, medical insurance and social insurance contributions.”
Despite that businessmen have supported initiatives of the Presidential Administration in general; it will be enormously difficult to reach an agreement with the Finance Ministry by March. Deputy Finance Minister Sergei Shatalov has announced frequently that his ministry is not ready even to discuss a prospect of VAT replacement with the TOS until 2009. The Finance Ministry is also averse to lowering the UST because in this case a deficit will appear in revenues of the Pension Fund of Russia.
<ref>RBC daily, November 30, 2006
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FORECASTS OF GOLDMAN SACHS REGARDING THE BRIGHT FUTURE OF BRIC COME TRUEForecasts of Goldman Sachs (GS) regarding the bright future of Brazil, Russia, India and China (BRIC) come true even faster than has been expected by this investment bank. In five years, the share of BRIC countries in the global GDP grew from 7.8% to 11%. GS promises that BRIC countries will outrun the group of six most developed countries of the world already in 2035. The favorable forecasts are working and investment funds invest more money in BRIC countries.
In 2001, the “BRIC concept” got hold in the minds of economists and political scientists of various countries. In the last few years, the four largest emerging economies of the world according to population have been growing relatively fast. Economists of GS who united the four countries into the BRIC acronym five years ago stated that by 2050, these countries would enter the group of the largest countries according to GDP: for example, in 2032 India would outrun Japan according to the size of economy and in 2041 China would outrun the US.
At first, economists criticized the idea of BRIC. The critics said that the model of GS did not take into account the degree of adequacy of the economic policy pursued by the countries and did not take into account the fact that they would encounter appreciation of national currencies. Since then GS improved the methodology and BRIC were growing even faster than economists had expected. The share of BRIC countries in the global GDP grew from 7.8% to 11% (China accounted for two-thirds of the growth) and in dollar terms it more than doubled.
Economists of GS were glad and changed their forecast for an even more optimistic one. To date they have believed that BRIC countries would outrun the group of six most developed countries of the world (US, Germany, Japan, France, UK, Italy) only by 2042, but now they are convinced that this will happen already in 2035. Contribution of BRIC countries to the global GDP will exceed the contribution of the US already between 2007 and 2008.
BRIC countries owe their rapid success primarily to China. In five years its GDP more than doubled. It grew by a sum equivalent to the GDP of France. China has become the fourth largest economy in the world and will outrun Germany even before 2010, predicts GS. At any rate, contribution of Russia (its share in the global GDP grew from 0.8% to 2%) and India is big too. In less than ten years after the crisis, Russia’s gold and currency reserves reached $280 billion exceeding the reserves of all countries in the euro zone, explained representatives of GS. GS forecasts that by 2050, Russia will enter the group of the richest countries in the world from the standpoint of per capita income ousting Italy and Germany. According to the size of economy by that time Russia will take seventh place after China, US, India, Japan, Brazil and Mexico.
Optimism of GS does not surprise Yulia Tseplyaeva, director of the research department of ING Bank, “It is obvious that if the speed of growth of Russia’s economy is faster than the speed of growth of European economies it will sooner or later outrun them.” She adds that the question is only when this happens. Yaroslav Lisovolik, chief economist of Deutsche UFG, says that nobody doubts the bright future of BRIC countries. Lisovolik adds that favorable forecasts of GS has served a good service for the Russian stock market and institutional investors have come to it.
The idea of GS turned out to be a hot investment idea. In the last couple of years, well-known managing companies including DWS Investment, Franklin Templeton Investments and HSBC Asset Management established BRIC funds. At the end of 2005, MSCI Barra, the leading provider of stock indices, launched a separate index for BRIC countries and Emerging Portfolio Fund Research collecting data on investments of 15,000 funds with aggregate assets of $7 trillion started tracking the inflow of money to BRIC funds. According to Emerging Portfolio Fund Research, since the beginning of 2006, investors invested 44.1 billion in BRIC funds, which accounted for more than 20% of the aggregate net inflow of money to all funds of emerging markets ($19 billion). Along with this, so far assets of BRIC funds ($10.9 billion) account only for 3.5% of the aggregate funds of shares of emerging markets. Investors believe in BRIC countries and since the beginning of 2006, the MSCI BRIC index grew 37%.
<ref>Vedomosti, December 01, 2006
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WHO IS SOBER IN THE RANKS TODAY?<stl>Russian army is 66.67% smaller than the Soviet one but it drinks twice as much
<aut>Victor Baranets
<src>Komsomolskaya Pravda, November 29, 2006, p. 10
<sum>Continuation of the article about drinking in Russian army</sum>
<cov>DRINKING IS A PLAGUE IN THE RUSSIAN ARMY (ENDING)
<itl>Brief content of the first part: the author speaks about "drunken" army rituals, reasons for almost comprehensive drunkenness in the troops and its dramatic consequences. How vodka breaks career of generals and officers.
The contemporary military drinking also has a very interesting economic feature. It also explains partially why servicemen in the Russian army have started drinking more than servicemen of the Soviet army. Recall 1985, the peak of "totalitarian" drinking bout that forced the Central Committee of the Communist Party of the Soviet Union to issue a special resolution. At that time a colonel earned 350 roubles a month on average. On this money he could buy 87 bottles of vodka (4 roubles per bottle). Now commander of a regiment earns approximately 15,000 roubles a month. On this money he can buy 236 0.5-liter bottles of vodka (at 65 roubles per bottle). In 1985, a lieutenant earned 180 roubles a month and could buy 45 bottles of vodka on this money. Now a lieutenant earns 7,000 roubles a month and can buy more than 110 bottles of vodka. If we bear in mind that an officer who drinks on average level spends one-fifth of the salary on vodka the purchasing power of this part of the salary has grown 100-200%. However, if a Soviet lieutenant could buy almost 90 kilograms of meat for his salary, now a Russian lieutenant can buy only 55 kilograms of meat.
There is almost not a single day when we do not receive reports about terrible crimes of drunken servicemen against their compatriots. In St. Petersburg a drunken student of a military school killed several children from a kindergarten with his car. In the Pechora District of the Pskov Region drunken soldiers shot three energy workers dead. In Chechnya a drunken contract serviceman killed a policeman. In Vladivostok a drunken sailor killed his pregnant girlfriend.
According to the Interior Ministry, of the 30,000 Russians who die on the roads in the country annually approximately 5,000 die in "drunken" traffic incidents with participation of drunk drivers. Here are statistical data on the crimes committed by drunken servicemen against civilians with use of weapons and without them. In 2005, drunken servicemen killed or wounded deliberately or incidentally more than 100 people.
Among privates and sergeants the quantity of gross breaches and crimes committed in a drunken condition grows 15-20% a year. The 500 roubles of monthly salary is insufficient for the "senior soldiers" who have got used to drinking "to relieve stress." They force other soldiers to beg parents for money or to beg outside of the military units, to steal and to sell military property, ammunition and even weapons. At any rate, this is only one side of the problem. The quantity of conscripts, who have got used to heavy drinking even before the army, grows annually. Whereas there were 7% such young men among conscripts, now their share reaches 15% (according to the main organizational and mobilization department of the general staff and central medical commission of the Defense Ministry).
The main conscript resources of the army are in the poor families of workers and farmers where heavy drinking and alcoholism are especially widespread. From the same group of the population originate 90% of young men willing to become contract servicemen.
Here is only one example: of the 6,200 contract servicemen who got enlisted in the 76th airborne division (Pskov) more than 2,000 or almost one-third were finally sacked "for drinking and a-social behavior."
<par>From the dossier of Komsomolskaya Pravda
<itl>According to the nationwide Russian statistical data, there are 38 divorces per each 100 marriages. The biggest quantity of divorces is registered among the families of the military, especially young officers. One-half of their families get divorced. According to the main ideological department of the Defense Ministry, there are two reasons for this, namely everyday difficulties and drinking. In the last two years, more than 70 army and navy officers who were heavy drinkers committed suicide.
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NUCLEAR STRIKES IN THE NAME OF PEACE<stl>Results of computer-simulated WWIII cannot satisfy any involved party
<aut>Valery Yarynin, Professor of the Academy of Military Sciences
<src>Nezavisimoe Voennoe Obozrenie, No 44, December 1 - 7, 2006, p. 4
<sum>Put Russian and American experts together and let them run nuclear war simulations until they happen, if at all, with an acceptable option.</sum>
<cov>SIMULATIONS OF A NUCLEAR WAR MAY CONVINCE RUSSIA AND THE UNITED STATES OF POINTLESSNESS OF ATTACKING EACH OTHER
<itl>The wave of indignation in Russian media outlets caused publication of the article by US Professors Lieber and Press in Foreign Affairs and International Security, is over. The article in question stated in no uncertain terms that the United States already possesses the capacity to wipe out Russian Strategic Nuclear Forces without fear of retaliation. Let us consider the American Professors' arguments once again.
These authors of triumph over Russia in a virtual war used a simulation based on two fairly simple formulas. The first is needed to calculate radius of destruction of targets in Russia that mostly depends on characteristics of the target itself (silo, mobile complex, submarine, etc.). The second calculates the chances of its destruction by American means. The professors then correlate the known data on targets and strike means, put together results of "individual" calculations, and that is that.
A nuclear war in the meantime cannot be described by two simple formulas. This approach fails to take into account a great deal of other factors that modify the end result. No need to list all of them here, we will merely mention some gross flaws of this approach later on. There are experts (lots of them, in fact) who are convinced that analytical models cannot be used as research means for a nuclear war in principle because of the sheer impossibility to allow for all nuances of this complicated and unique process in formulas. Statistical simulations are better because they offer a more realistic picture.
The article by the Professors does not say a word on the ecological impact of the American first nuclear strike on Russia. Ecological impact in the meantime is precisely the eye of the needle that may define the Americans' attempts to squeeze through it. A correct evaluation of consequences of the first nuclear strike may prove that they will be absolutely unacceptable not only for the aggressor itself but for the whole world. The matter concerns explosions of American nuclear warheads themselves, secondary effect of the collapse of Russian nuclear objects, consequences of interception of the Russian retaliatory strike (if it is intercepted of course), and results of the retaliation itself (if the vaunted American ballistic missile defense system fails).
Lieber and Press maintain that the United States can safely count on guaranteed elimination of 95% of the Russian nuclear potential. But what about the remaining 5% they conveniently forget to mention at all?
If these 5% mean, roughly speaking, chances of survival of a Russian Satan ICBM with 10 warheads or a Russian submarine, then American taxpayers had better be wary.
Lieber and Press only consider a sudden, i.e. unexpected mass attack on Russia in time of peace, without the preceding period of deterioration of the situation. That's absolute rubbish. Why?
At least because an attack on Russia needs endorsement from US society in advance. If that's is not a signal to the intended target country to get ready, then I do not know what it is. Again, because the American population itself will have to be warned in advance.
The two Professors assume that their conclusions only apply to the scenario they charted and that Russian nuclear forces will be in a higher readiness status in crises periods. That latter assumption is certainly correct. And if a sudden, i.e. unexpected strike is an Utopia, why bother with all the rest of the speculations?
There are other flaws in this whole scenario of course but we are not going to dwell on them. On the other hand, it will be definitely wrong to dismiss it out of hand on the assumption that American Professors' conclusions are poppycock.
What conclusions shall be drawn?
The possibility of a growing gap between the quantity and even quality of American and Russian nuclear potentials should not be ruled out. Lieber and Press are right about that, as they are in many other things concerning the current shape of American and Russian potentials.
Even the growing gap in the potentials in the meantime is not a cause for panic. The mistake they make (and so do their critics) is rooted in the assumption that the United States is on the threshold of making its superiority such that the risk of retaliation will be null. This is where one term is inserted in another's place: proof of the ability to destroy is used instead of risk evaluation. And the ability to destroy is not something that needs evidence. It is common knowledge that the United States and Russia are capable of destroying the other with the very first strike. Many times over, in fact. The question is in the ability to prevent it with the prospect of retaliation. Proving inevitability of this retaliation is what is needed from us.
And how can it be proved. There is only one way of accomplishing it: through joint research. That's the banal truth in the sphere of nuclear deterrent. Banal or not, it is not working.
Only one solution is possible. US and Russian experts should crowd around one and same computer and start playing options of a nuclear war between our countries. Secrecy? No problems with it. Simulations may be run on the already known data (say, the one used by the American Professors). Even better to have experts' findings regularly covered by the media.
Let these experts play and play options until they chance on one showing no retaliation and acceptable consequences to the environment. And since it will probably take them long to stumble on this option, it will be peace between our countries for the time being. Because attacking when impunity is not assured is stupid. Let us hope that there will be few such canards in the future.
