A Report on Russia

Fred Harrison

[A letter sent 15 October 2001 by the Fred Harrison,
on behalf of the Centre for Land Policy Studies]

The Georgist President

VLADIMIR PUTIN continues to stress his credentials as a tax reformer. In this year's Message of the President of the Russian Federation to the Federal Assembly (Moscow, 2001, p.25), Putin recalled the "cardinal tax reform" pledge in his election programme, and he firmly declared:

Today our strategic priority is the rational and fair taxation of natural resources - the main wealth of Russia, real estate, and the gradual reduction of taxation of non-rental revenues and the final abolition of taxation of turnover [sales, VAT].

It is one of the major accomplishments of our work in Russia that the President's philosophy (for which we do not claim credit) is broadly understood in the nation and popularly discussed in a way that is absent in any other country (for which we do claim some of the credit). Take as a random example the interview given by Moscow businessman Alexander Panikin (Moskovsky Gazette, October 3), in which he attacks government tax reforms. Progress in growth rates counts for little if "every citizen in Russia is not able to get his share of natural rent, which belongs to him by right", he insisted.

But ministers in the Ministry of Finance are at odds with the President over rental policy. Take the case of the Land Tax. This raises a paltry sum, but at least it preserves the recognition that urban land is a distinctive source of revenue. The Ministry, according to our informants in the Duma, is now laying the groundwork to merge the Land Tax into a general property tax which would also fall on buildings. The Duma Budget Committee is being lined up to persuade the legislators to accept this change.

This proposal flies in the face of what the President says he wants to achieve. There is an ideological conflict here which reveals a tension in the structure of power. Who rules? The President appoints the government, but the government is cynically jeering at the President's most cherished policy -- his "cardinal tax reform."

We expose the rift in thinking in the new booklet we have just published for circulation among politicians and the media. Provocatively, we have entitled this booklet the The Prisoner President. We refer, of course, to Put in being an ideological prisoner.

THE LAND CODE is on the verge of being ratified by the Council of Federation (Upper House). This is a dog's dinner of a Code. The government is right to insist on private possessory rights, which the communist and agrarian parties have been resisting. On the other hand, the mechanisms employed to transfer land rights out of the hands of politicians and bureaucrats are dangerously formulated. They will do nothing to diminish corruption.

We still have everything to fight for however, in that the key issue is the payments for the use of land. This is the battle to be fought when the Duma starts to thrash out the second part of the Tax Code. Again, we have detected the influence of the Ministry of Finance behind the pressure on civil servants to draft dubiously-worded clauses.

One of our colleagues, Dr. Sergei Glazyev (Chairman of the Duma Economics Committee) has commissioned a study of tax policy from us which he will circulate among his colleagues. We do not have the time to print this study, but Clazyev says that this is not a problem: he will use the Duma facilities to run off all the copies he needs to reach the key players whose minds are being bent by those who wish to pervert the course of justice.

So the fight proceeds. The opportunities for promoting our thesis never ceases to amaze me. Take the seminar held by the Economics Department of the Academy of Sciences just over a week ago. The principal speaker was Metropolit Cyril, the architect of the Russian Orthodox Church's social policy. He appealed to the scientists for help in reviving the church so that it can fulfil its spiritual and social obligations. I was invited to address them, which was the chance to remind the priests that the theology of land was the motif that ran through the Old Testament. This contains the clues to the revival of the church and the way in which the spiritual leaders could serve the people of Russia. Metropolit Cyril's pen did not stop as I spoke, and he acknowledged that my offering was important for him. I have no doubt that the working group established that day by the priests and academicians will stress the spiritual significance of the rent of land in the quest to renew the culture of the people of Russia.

Meanwhile, the Russian Fund on which we rely has £1,923 in it. This is just enough for two visits to Moscow. If you believe that the work is worth backing, please send your donation to Barbara Sobrielo. As ever, we are grateful for your moral support.