BELARUS NEWS AND ANALYSIS

DATE:

28 Febraury 2005

Belarus witnesses outbreak of protest

By Alyaksandr Kudrytski

MINSK, Belarus-The normally empty area in front of the Belarusian Parliament was unusually active Feb. 10. An angry crowd of market traders had collected around the black statue of Lenin that faces the building, part of a nationwide action that shut down 63 large markets for the day.

Small traders took to the streets nationwide, shutting down their stalls to protest the imposition of a new tax that they say could ruin many of the country's markets, a key element in the national economy. It was the second time in a year that thousands of traders rallied against tighter state control over their affairs.

As protestors massed around the Lenin statue, between 2,000 and 3,000 more blocked the entrance to the nearby Tax and Fees Ministry as surprised clerks watched from the windows. "I calculate that a businessman selling at a market pays about 300,000 rubles (Kc 3,200/E 107) in taxes a month on each stall," said Leanid, who said he was a trader at the central building-material market in Minsk's Uruccha district.

Traders became restive after Jan. 1, when Belarus and its most important trading partner, Russia, began applying the "destination country principle" to value-added taxes (VAT). This meant that the Belarusian importer, not the Russian exporter as had previously been the case, is liable for the 18 percent VAT on goods purchased in Russia. Since Belarus imports more goods from Russia than it exports, the agreement promises to bring an extra $200 million in annual revenues to the Belarusian state.

Although small traders have been the most vocal opponents of the new rules, major players are affected as well. This became clear when Russia's natural-gas giant Gazprom, the main supplier to Belarus, refused to lower the price it charges Belarusian state-owned distributor Beltransgaz. The additional 18 percent VAT added to Beltransgaz's costs will have to be at least partly absorbed by Belarusian consumers. In addition, most of the country's 200,000 sole-proprietor market traders buy their stock in Russia. Now, no matter whether the goods come from St. Petersburg or Shanghai, the Belarusian importer will be responsible for the 18 percent VAT.

Belarusian President Alyaksandr Lukashenka announced the VAT change Feb. 9. A day later, chants of "down with VAT!" echoed outside the walls of Parliament. Simultaneous protests took place in a dozen other cities and towns, attracting up to 20,000 people according to even the usually modest police estimates. The number of strikers and protesters was estimated at 60,000-70,000 by the trader's association Perspektyva, the main organizer of the protests.

The biggest single rally took place in Hrodna (Grodno), where about 4,000 people gathered at Lenin Square in the city center. Unlike in Minsk, protesters scuffled with riot police and even tried to break into the city administration building.

Local authorities seemed unsure of how to deal with the protests and organizers declared a partial victory. The VAT was not lifted, but a joint working group of government officials and business activists was created. It will look into the traders' demands to lift the new VAT rules and cut other taxes and fees imposed on small businesses. If their conditions are not met before Feb. 20, Perspektyva says, a nationwide strike will begin March 1. Traders are also threatening to withhold tax payments in a worst-case scenario - a serious threat, given that small businesses already pay about $200 million in taxes every year.

Can small businesspeople drive a wedge into the monolithic control over Belarusian politics held by Lukashenka and his allies? Although it appears that many small business owners are afraid that rousing the authorities' ire could damage their financial interests, many have not lost hope that the present regime could create acceptable conditions for business. But more and more small business owners are beginning to wonder if Lukashenka will ever give up his repeated attacks on traders, whom he has called "lousy fleas" in the past. "This regime won't bring us any good. VAT will make thousands of people unemployed and will make their families and their children starve," said Perspektyva activist Alyaksandr Talstyka.

SOURCE:

http://cbw.cz/phprs/view.php?cisloclanku=2005022821