FM AMERICAN EMBASSY MOSCOW

1. ON THE EVE OF GENERAL DISCUSSIONS IN THE
RUSSIAN DUMA ON A PACKAGE OF TAX LEGISLATION,
INCLUDING THE VALUE ADDED TAX, THE MAIN CABINET
AGRICULTURAL OFFICIAL, MR. A. KALININ, ANNOUNCED
THE GOVERNMENT'S PLANS TO CUT THE VAT ON MOST
AGRICULTURAL AND FOOD PRODUCTS FROM 20 TO 10
PERCENT. RESOLUTION #1120 "ON FOOD PRODUCTS THAT
ARE LIABLE FOR 10 PERCENT VALUE ADDED TAX"  WAS
ADOPTED BY THE GOVERNMENT ON NOV. 13, 1995, AND
WAS OFFICIALLY PUBLISHED AND BECAME VALID ON
NOV. 18, 1995 (PARA 5).  THE CHANGE AFFECTS MOST
OF THOSE AGRICULTURAL AND FOOD PRODUCTS THAT
WERE NOT INCLUDED IN THE LIST OF FAVORABLY TAXED
FOOD PRODUCTS ADOPTED BY THE GOVERNMENT LESS
THAN 5 MONTHS AGO, ON JULY 1, 1995.

2. THE CHANGE IS PART OF A GENERAL TENDENCY ON
THE PART OF THE GOVERNMENT TO TAKE STEPS TOWARDS
STABILIZING FOOD PRICES, ESPECIALLY IN THE DAYS
PRECEDING THE DECEMBER 17 DUMA ELECTIONS.  THE
GOVERNMENT HAS BEEN ACCUSED OF IGNORANCE AND
INDIFFERENCE TO THE CONCERNS OF ORDINARY
CONSUMERS, AND WAS ANXIOUS TO ACT PRIOR TO THE
DUMA'S DISCUSSIONS ON "MAKING AMENDMENTS TO THE
LAW OF THE RF ON THE VALUE ADDED TAX" WHICH WAS
SCHEDULED FOR DISCUSSION ON FRIDAY, NOV.17,
1995.  THE MOVE WAS ALSO IN RESPONSE TO THE FOOD
AND AGRICULTURAL PRODUCTS PROCESSORS, TRADERS
AND IMPORTERS LOBBIES.

3. AMONG THE TOPICS TO BE DISCUSSED BY THE DUMA
WAS THE HIGH RATIO OF VAT ON SOME AGRICULTURAL
AND FOOD PRODUCTS. HOWEVER, BY THE TIME OF THE
MEETING, THE VAT HAD BEEN DECREASED FROM 20 TO
10 PERCENT FOR THE MOST IMPORTANT AGRICULTURAL
PRODUCTS, INCLUDING: LIVESTOCK AND POULTRY,
GRAIN AND FEEDS, INCLUDING FEED MIXTURES AND
GRAIN WASTES, AND OILSEEDS AND PRODUCTS.  THE
RANGE OF HIGH VALUE PRODUCTS WITH A 10& VAT WAS
ALSO EXPANDED TO INCLUDE DAIRY PRODUCTS, BAKERY
PRODUCTS, AND VEGETABLE AND POTATO PRODUCTS. THE
MAIN GROUP OF PRODUCTS OF IMPORTANCE TO
CONSUMERS STILL SUBJECT TO THE 20 PERCENT VAT IS
FRUIT AND FRUIT PRODUCTS.  THE VAT FOR THESE
PRODUCTS MAY BE CONSIDERED FOR THE CONCESSIONARY
RATE AT A LATER TIME.

4. SOME OTHER SUGGESTIONS OF THE DUMA ON THE VAT
MAY ALSO INFLUENCE FOOD AND AGRICULTURAL
PRODUCTS INDIRECTLY, BUT THOSE CHANGES WILL BE
DISCUSSED AND CONSIDERED IN THE OVERALL PACKAGE
OF TAX DOCUMENTS.  ONE PROPOSED AMENDMENT
CONCERNS PRODUCTS IMPORTED INTO THE RF AS
HUMANITARIAN AID: IN 1996 THEY MAY BE SUBJECT TO
THE APPLICABLE VAT (FORMERLY  HUMANITARIAN AID
PRODUCTS WERE EXEMPT FROM VAT ON THE TERRITORY
OF THE RF).

5. THE RESOLUTION #1120 OF THE GOVERNMENT OF THE
RUSSIAN FEDERATION REPLACES ITS RESOLUTION #659
ISSUED JULY 1, 1995, IT EXPANDS AND MORE CLEARLY
DEFINES THE LIST OF FOOD PRODUCTS THAT ARE LIABLE
FOR THE LOWER (10&) VALUE ADDED TAX:
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PRODUCT GROUP                         BEFORE  NOW
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------------
1.  LIVESTOCK AND POULTRY
   (LIVE WEIGHT)                       20   10
2.  MEAT AND MEAT PRODUCTS             10   10
(EXCEPT DELICATESSEN MEAT PRODUCTS LIKE: SIRLOIN,
VEAL, TONGUE, RAW SMOKED SAUSAGES, SMOKED AND
BAKED BEEF AND PORK PRODUCTS, CANNED HAM, BACON,
SOME OTHER DELI CANNED MEAT PRODUCTS)  20   20
3.  MILK AND DAIRY PRODUCTS
    - MILK                             10   10
    - KEFIR                            10   10
    - COTTAGE CHEESE                   10   10
    - CREAM BUTTER                     LO   10
    - OTHER DAIRY PRODUCTS             20   10
4.  EGGS AND EGG PRODUCTS
    - EGGS                             10   LO
    - EGG PRODUCTS                     20   LO
5.  VEGETABLE OIL                      10   10
7.  MARGARINE                          20   10
8.  SUGAR, INCLUDING RAW SUGAR
    - SUGAR                            10   10
    - RAW SUGAR                        20   10
9.  SALT                               10   10
10. GRAIN AND FEEDS, FEED
    MIXTURES, GRAIN WASTES             2O   LO
11. OILSEEDS AND PRODUCTS

    (MEAL AND CAKE)                    2O   LO
12. BREAD                              10   10
13. BAKERY PRODUCTS (INCLUDING BUMS, DRIED BAKERY
    PRODUCTS AND RING-SHAPED ROLLS)    20   10
14. GROATS                             10   10
15. FLOUR                              10   10
16. PASTA PRODUCTS                     10   10
17. FISH (FRESH)                       10   10
18. FISH PRODUCTS AND SEA-FOOD, INCLUDING
    CHILLED AND FROZEN FISH, HERRINGS, 10   10

    TINNED FISH AND PRESERVES
   (WITH EXCEPTION OF MORE THAM 12 NAMES OF
   CATEGORIES OF DELICATESSEN FISH PRODUCTS)
                                       2O   2O
19. BABY-FOOD                          10   10
20. DIABETIC FOOD PRODUCTS             20   10
21. VEGETABLES AND VEGETABLE PRODUCT
    - VEGETABLES                       10   10
    - VEGETABLE PRODUCTS               20   10
22. POTATO AND POTATO PRODUCTS
    - POTATO                           10   10
    - POTATO PRODUCTS                  2O   10
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