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Kudrin predicts tax hikes after presidential elections

Finance Minister Alexei Kudrin said taxes will have to go up after the presidential election in Russia in March 2012 if pre-election promises are to be kept.

Budget policy has become more risky with the presidential election getting closer, and Kudrin stressed the need for reforms, adding that he would be willing to work in the government to implement them.

"The game of pre-election decisions ... turned out to be bigger than even I expected, and they often run counter to the mid-term and long-term stability of the economy and the budget," he said.

"For a system like ours, if we can't quickly cut spending, we need to raise taxes ­ this would increase the stability in the budget system and the economy as a whole," Kudrin told Reuters in an in-depth interview.

Kudrin ready to implement reforms

Kudrin also said that despite being finance minster since 2000, he is not tired, and would serve in any capacity, prompting speculation that he could become Russia's next prime minister.

"If reforms need to be carried out, I am ready to work with a government that is headed by a person who is ready to do that," Kudrin said. "But I repeat, I will work (with the government) only if reforms are carried out."

However, despite Kudrin's willingness, no one can yet name the future prime minister, deputy head of Political Technologies Center, Boris Makarenko, told Vedomosti.

"The new president will decide everything, and our personnel policy is unpredictable: in the early 2000s who would have thought that military reform would be implemented by a former head of tax services?"

Pensions the main challenge

"In the next three or four years the oil price could fall to $60 and stay there for six months," was the minister's somber prognosis. "For Russia, that would be a really difficult scenario."

"The pension system will be the main challenge in our financial system for the next five to 10 years," said Kudrin.

Pensions rose in Russia 50 percent in the crisis years of 2009-10, which had a good social effect, but increased the deficit in the pension fund.

The minister said the only solution would be to raise the retirement age from 60 for men and 55 for women to 62-63 for everyone. Or to raise taxes.

Responding to Kudrin's call to raise taxes after the election, presidential aide Arkady Dvorkovich tweeted: "No way."

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