Russia

Economic Restructuring Measures

Immediately after the dissolution of the Soviet Union was announced, the Government lifted price controls on 90 percent of consumer goods and 80 percent of intermediate goods. It raised, but still controlled, prices on energy and food staples such as bread, sugar, vodka, and dairy products. These measures were to establish a realistic relationship between production and consumption that had been lacking in the central planning system.

To encourage the development of the private sector, fundamental changes were made in the tax system, including introduction of a value-added tax (VAT--see Glossary) of 28 percent on most transactions, a progressive income tax, and a tax on business income; revisions in the system of import tariffs and export taxes; new taxes on domestic energy use to encourage conservation (a necessary step because energy prices were still controlled); and new taxes on oil and natural gas exports to narrow the gap between subsidized domestic prices and world prices and to prevent domestic energy shortages (see Taxation, this ch.). A fixed exchange rate was to be established for the ruble, which then would become convertible. Many restrictions on foreign trade and investment also were to be lifted to expose Russia to the discipline of world prices.