#10 - JRL 7206
Illarionov Says Putin Stands for Reducing Unsupported Budget Spending

ST. PETERSBURG, May 30 (Itar-Tass) -- President Vladimir Putin stands for reducing the federal budget spending, which is not backed up with real finances, presidential economic adviser Andrei Illarionov has said referring to Putin's budget message sent to the government and the parliament on Friday.

Putin asked the federal and regional executive and legislative authorities "not to make decisions, which will entail higher spending from budgets of all levels," Illarionov said.

He also warned against making the budget of 2004 "a hostage of pre-election ambitions or business lobbying," he said.

The message describes as key tasks of the budget policy for 2004 and the medium-term prospect, higher living standards, sustainable economic growth, orientation at the future, and improvement of the budget system.

The message notes the need to continue the tax reform. It is planned to reduce the VAT (value added tax) from 20 to 18% in 2004, and to make it 16% in the future if the economic development is sustainable.

It is planned to reduce the unified social tax rate starting from 2005. Putin also noted the need to upgrade the quality of tax administering and to make simpler the tax system. He thinks it necessary to finalize the division of budget and tax powers between levels of the budget system.

Reforms will concentrate on education, health care, recruitment of army servicemen, and courts. It is planned to broaden the independence of local authorities against the background of a more efficient functioning of federal structures.