Russian Duma passes 5% sales tax Levy is part of austerity package needed for bailout

July 17, 1998|By LOS ANGELES TIMES

MOSCOW -- Russia's lower house of parliament, under pressure to raise revenue so the country can qualify for $17.1 billion in new foreign loans, passed legislation yesterday imposing a 5 percent sales tax on consumer goods.

The measure, which would raise an estimated $6.5 billion for Russia's regional and local governments, is the centerpiece of a program proposed by President Boris N. Yeltsin to revive the struggling economy by slashing spending and raising taxes.

But lawmakers stopped short of approving the government's entire $16.5 billion austerity package, required by the International Monetary Fund and the World Bank for an emergency bailout.

"We have accomplished at least 50 percent of what the government wanted us to and 100 percent more than what the government really expected us to do," said Communist deputy Victor I. Ilyukhin. "I don't think we are going to make any more concessions."

Still, the State Duma, as the lower house of parliament is called, agreed to convene again today to debate the final controversial measures, including a proposed tax on land that would raise $5.2 billion in revenues.

Rapid approval of the stabilization program is critical to Russia's economic future as the government tries to get out from under a mountain of short-term debt and lure back investors scared off by fears of devaluation of the ruble.

It is also crucial because the IMF and the World Bank will withdraw their bailout offer if most of the package is not enacted.

The board of the IMF, the biggest lender involved in this rescue package, will meet Monday to decide whether to approve an immediate $5.6 billion disbursement from the $17.1 billion loan package negotiated in Moscow this week.

Loans totaling $22.6 billion are riding on parliament's approval of the austerity program -- the latest bailout, plus $5.5 billion in loans tentatively approved earlier by the IMF and World Bank.

The Communist-dominated Duma has been one of Yeltsin's biggest obstacles in enacting market-oriented programs and cutting the size of the government.

Pub Date: 7/17/98

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