Vladimir Putin: has had a stabilising effect on Russia’s economy
Vladimir Putin has been in power for just over a year, but foreign lawyers in Russia feel he has done more for the stability of the country than Boris Yeltsin did throughout his entire term.
Lawyers point to the recent changes in tax reform, which were passed by the Federation Council on 26 July. A number of measures that were included in the reforms are expected to come into force at the beginning of next year. Under the reforms, personal income tax will now be fixed at 13 per cent, although corporate taxes will increase. Corporate profits will continue to be taxed at 30 per cent with an additional 5 per cent added to subsidise regional governments, instead of the current social services tax, which is currently 4 per cent of corporate revenues.
Elena Kirillova, former head of CMS Cameron McKenna’s CIS practice, who is moving to Denton Wilde Sapte as a consultant for its CIS group, says: “The parliament is now a better parliament for reform. Putin has been very committed to liberalisation. He’s been able to get through legislation that Yeltsin couldn’t.”
In September, Putin spoke out about the need to improve the running of production-sharing agreements (PSAs) in Russia. A PSA allows companies – commonly energy companies – to carry out exploration and extraction projects under a specific tax regime that is determined under the agreement. Putin has said that PSAs will be one of the main focuses for German Gref, the Russian minister for economic development.
Lawyers have also spoken of the potential for Putin to enforce the rule of law throughout the region. But Paul Melling, founding partner at Baker & McKenzie‘s Russian practice, says that considering the changes that have taken place in Russia since the collapse of communism in the late 1980s, the country is doing quite well in implementing the rule of law. “When I came here in 1989, making a profit was a criminal offence,” he says. “It’s an excuse I hear from bad lawyers about the lack of rule of law. They might say, åI lost my shirt in a deal because it wasn’t worth the paper it was written on,’ but the fact is, they simply shouldn’t have done the deal in the first place.”