RUSAG-L: Current Events #22
Please keep in mind that the following current events information represents
information about events in Russian agriculture we received during the past
week, while the actual events may have occurred earlier.
The sources for the information below include, but are not limited to, the
following: the Radio Free Europe/Radio Liberty Daily Report (RFE/RL), the
Foreign Broadcast Information Service at the Central Intelligence Agency's
Central Eurasia Daily Report (FBIS), Nexis/Lexis through Mead Data Central,
Inc., The Interfax News Agency, Food and Agricultural Report, and C-The
The Russian Agricultural List Serve is sponsored by the University of
Maryland College of Agriculture at College Park, the Research and Scientific
Exchanges Division, Foreign Agriculture Service/International Cooperation and
Development, U.S. Department of Agriculture, and the National Committee
on International Science and Education of the Joint Council on Food and
7 May 1994:
-The current exchange rate is listed at R1841 per dollar. (-TheWashington
Post, May 7, 1994)
5 May 1994:
-Reuters and Interfax reported on May 4 that the inflation rate rose a
percentage point to 9.7. The government's statistical committee reports
monthly inflation rates for the months ofJanuary through April as follows:
22.0, 9.0, 8.7, and 9.7. Officials consider these rates understatements, but
consistent, which captures the trend. Economist Grigorii Yavlinsky
predicts inflation rates will continue to edge upward and then explode in the
summer. (RFE/RL, May 5, 1994)
4 May 1994:
-In an interview with -The Financial Times,- senior economic advisor to
President Boris Yeltsin, Aleksandr Livshits, said it was unlikely Russia would
be able to keep inflation to single digit numbers. Livshits blamed declining
industrial output, which fell about 25 percent during the first quarter of
this year. He stated that higher inflation was the only way to save Russian
industry from collapse. According to IMF stipulations, Russia must keep
spending in the 1994 federal budget at 183 trillion rubles and boost revenues.
(RFE/RL, May 4, 1994)
In an attempt to boost foreign investment in Russia and to allay potential
investors' doubts, Yurii Petrov, head of the State Investment Corporation
(Gosinkor), says the Russian government might consider legislation preventing
the changing of Russian laws for three to five years. Russian
legislation affecting foreign investment is often viewed as chaotic at best.
Members of the American Chamber of Commerce in Russia have already warned
American businessmen to reconsider making loans to their Russian partners or
subsidiaries. Recently, tax authorities in Russia have attempted to charge a
23 percent value-added tax on all loans from outside Russia. (RFE/RL, May
-The New York Times- reported on May 2 that the Russian government has refused
to exempt several billion dollars worth of Western credits from a series of new
taxes. Some Russian companies are refusing to use money supplied by the World
Bank and EBRD (European Bank for Reconstruction and Development) for oil loans
because the 20 percent value-added tax and 3 percent special tax make the
projects uneconomical. Western oil companies in Russia are already charged an
export tariff of nearly $6 a barrel. (RFE/RL, May 4, 1994)
-On March 10, Prime Minister Viktor Chernomyrdin announced that the Nizhny
Novgorod land privatization program would be used throughout the Russian
Federation. His decree, "On the Practice of Agrarian Transformations in Nizhny
Novgorod Oblast," does not require the consent of Parliament. According to the
decree, kolkhozes and sovkhozes must auction off their land to their members as
private property. Members then receive vouchers which entitle them to part of
the land and machinery. They are encouraged to form partnerships with other
members to form viable units. The decree holds Deputy Prime Minister,
AleksandrZaveryukha, who is in charge of agriculture, and Anatolii Chubais, who
is responsible for overseeing privatization, accountable for implementation of
the decree. (RFE/RL, May 4,1994)
2 May 1994:
-In his message to the Federal Assembly, Russian President Boris Yeltsin
outlined a number of policy goals for 1994. Yeltsin complained that economic
legislation lacked unity and listed several draft laws that are scheduled to be
presented to the Duma in 1994. The list included: additional laws on agrarian
issues and taxation, changes or supplements to laws on bankruptcy, private
farms, competition, and limitations on monopolistic activity. (Russia and
Commonwealth Business Law Report, May 2,1994)
15-22 April 1994:
-Ivan Gridasov, who is the Russian Ministry of Agriculture official in charge
of crop growing, told Interfax that Russian farmers had sown about 1 million
hectares with spring grain as of April 18. 138,000 hectares of sugarbeets and
15,300 hectares of potatoes had also been sown. Gridasov said it is too early
to predict how big this year's harvest will be. (Interfax News Agency, Food and
Agricultural Report, April 15-22, 1994)
-Excise stamps will be placed on Russian tobacco and alcohol products beginning
July 1 and August 1, 1994 in an effort toprotect domestic markets against
underground production and illegal imports. Of the 200 million deciliters of
alcohol consumed by Russians each year, an estimated 70 million deciliters
comes from imports. Officials claim illegal imports account for 30 million
deciliters of the imported alcohol. (Interfax News Agency, Food and
Agricultural Report, April 15-22,1994)
22)29 April 1994:
-Coca-Cola officially opened a $35 million dollar plant in Moscow and plans to
open a second plant in St. Petersburg. Coca-cola operates several plants in
the CIS, but the Moscow operation will be the first company wholly owned by
Coca-Cola in the confederate area. (Interfax News Agency, Food and Agricultural
Report, April 22-29, 1994)
-The Russian Fisheries Committee reports that the first-quarter production
figures for this year are down by 25.5 percent. At some facilities on the
Black and Baltic Seas, figures were down by 80-90 percent. The Committee says
Russia has little chance of meeting last years figures of 4.2 million tons. In
1991, Russia's catch figures were listed at 6.9 million tons. Officials blame
shortages of materials and cash caused by the national debt crisis. (Interfax
News Agency, Food and Agricultural Report, April 22-29, 1994)
-Food prices for the week of April 19 rose by 1.3 percent. There was a 4
percent increase in the price of salt, a 3 percent increase in the price of
pasta and vegetables, and a 3.7 percent increase in the price of food. The
Russian State Statistics Committee lists the following organized trade prices
in rubles per kilogram in Moscow as of April 19, 1994: beef-2931; bread-734;
eggs-999; milk-591; and butter-3944. In Vladivostok, on the other hand,
organized prices were as follows: beef-3286; bread-992; eggs-1100; milk-1222;
and butter-3528. City free market prices in rubles per kilogram in Moscow as
of April 19, 1994 showed the following prices: beef-8614; eggs-1930;
milk-2566;and butter 8773. In Vladivostok, the free market prices available
included: beef 6300; eggs-4000; and milk-4000. [Russian organized free trade
includes prices from retail outlets, private or state-owned, that are
"permanent purpose-built" and work on a large scale. City free market
prices include the "gray market," plus booths and street traders inlarge
population areas. According to Interfax the gray market accounts for 15
percent of total trade turnover.] (Interfax News Agency, Food and Agricultural
Report, April 22-29, 1994)
-New import taxes which were scheduled to take effect on March 15,
have now been put off until July 1. Russian and American analysts have
characterized these protectionist tariffs, enacted to boost floundering Russian
producers, as detrimental to reforms and potential investments. (Central
European Business Guide, April 1994)
Area of Interest: Ukraine
-Ukraine plans to sign an agreement with the European Union in June, giving
Ukrainian goods greater access to West European markets. The EU also plans to
extend a 100 million Ecu aid package to Ukraine. In addition, the United
States offered Ukraine a $350 million aid package during Ukrainian
President Leonid Kravchuk's visit to the US in March of this year. (RFE/RL, May
Area of Interest: Estonia
-The Estonian Privatization Agency plans to privatize another 56 enterprises.
Up for bids is a uranium plant in Sillamae formerly owned by the Soviet
military-industrial complex and several smaller companies. (RFE/RL, May 5,
Due to the confusing nature of Russian tax codes, I thought it might be helpful
to list some of the federal, regional, and local taxes levied on operations and
individuals in Russia. The following information was taken from the April 1994
edition of the Central European Business Information Services. Please keep in
mind that some of the taxes may have already been altered or dropped
altogether. This is not an inclusive account of the Russian Tax Code.
*Russia requires the following groups to pay taxes: all legal entities,
including joint ventures and international unions and organizations that
operate in Russia.
*Foreign legal entities founded outside of Russia but engaged in business in
Russia through an accredited office or an individual representative.
*Russian and foreign citizens who earn income from activities in Russia.
VAT or value-added tax. There is a 10% VAT on foodstuffs, except for products
that are subject to excise taxes. Certain items from a government-approved
list of goods for children also include a 10% VAT. All other goods and
services carry a 20% VAT, including those that are subject to an excise tax.
Special tax. This tax essentially increases the VAT onfoodstuffs from 10% to
13% and the VAT on all other goods and services from 20% to 23% .
Profit tax. A flat 13% tax on all enterprises, domestic or foreign. Regional
governments also assess additional profittaxes.
Individual income tax. A 40% tax on all earned incomes.
Tax on securities firms.
Taxes on import/export activities. This includes the import tariffs that were
scheduled to be effective March 15, 1994 but were delayed until July 1, 1994.
Tax on road users.
Tax on the use of the name "Russia" or any derivations on the name "Russia" in
a company name. This tax rate ranges from 0.04% to 0.4% of the gross volume of
production, regardless of profit.
Profit tax. This is in addition to the federal profit tax. Regions may tax
banks and insurance companies up to 30% and all other enterprises 25%.
Property tax. Enterprises are subject to a tax on their actual property. The
rate cannot exceed 2% of the taxation base.
Tax on use of water resources (for industrial enterprises only).
Land tax (for land owners only).
Fees and payments on designated activities. This includes taxes for obtaining
licenses for trade, sale of alcohol or cars, etc.
C CAnotherAnother interesting tax note:
The Russian State Customs Committee has imposed a 60% tax on the transfer of
personal belongings to and from Russia. The duty applies to goods with a total
value greater than $2000, but the customs official has the authority to
estimate the goods' value. The business community has expressed shock at this
tax. It appears to contradict an existing law that exempts employees of
foreign firms from taxes on their personal belongings.
Each Russian legal entity pays a combination of federal, regional, and local
taxes. The amount depends on the location and the activities of the
enterprise. Foreign legal entities that do not have an office or legal
representative in Russia but that receive income from Russian operations must
pay an income tax ranging from 6% to 20%.