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Russia’s Taxes and Nuclear Parity

Russia’s best finance mind Alexei Kudrin is trying out a new argument in his opposition to slash value-added tax from 18% to 12%, notably pointing out that it could hurt the country’s nuclear parity with the United States:

Kudrin said the cut in VAT, which accounts for about one- third of budget revenues, will require a reduction of expenditure, including on national defence and security, which currently stands at one third of budget spending. “Russia is the only country in the world, which has a nuclear parity status with the U.S.,” Kudrin told a tax conference. “The nuclear war cannot start as long as there is nuclear parity… Russia’s mission is to carry this burden.” (…) Kudrin and his supporters argue the economy, currently growing at a rate of 8.4 percent, is overheated and may be heading for a hard landing as inflation is running at 15 percent. His opponents say Russia needs to cut taxes to achieve higher growth rates.

I think this is Russia’s version of how Washington plays the terrorism card with regard to spending – however the smart money is on Kudrin being right on inflation.