Russian Finance Ministry sees no room for tax cuts

By Darya Korsunskaya

MOSCOW, Jan 29 (Reuters) - Russia's Finance Ministry sees no room for future tax cuts given rapidly rising social welfare spending, a top official said on Tuesday, providing some early clues about the fiscal policy of the next government.

Russia ran a fiscal surplus of 5.5 percent of the gross domestic product in 2007 and passed a three-year budget for 2008-11 to ensure a smooth transition of power after President Vladimir Putin steps down following elections in March.

"We do not see a possibility for significant tax cuts in the foreseeable future, especially taking into account rising social spending," Deputy Finance Minister Sergei Shatalov told a news conference on Tuesday.

Putin said social policy should be among top priorities for the new government, which he said he may head if his anointed successor Dmitry Medvedev wins the election. The 2008 budget is already being amended to accommodate pension and wage hikes.

The oil sector accounted for 50 percent of the federal budget revenues or 12 percent of GDP in 2007, according to the Alfa Bank research. The oil industry complains the tax burden is too heavy.

Shatalov said some tax breaks were already in place for oil extraction in Eastern Siberia as well as for extraction from deposits nearing depletion. He added that tax breaks for offshore oil extraction were also discussed.

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