Vladimir Putin: Good morning, Let us begin.

Ms Tatyana Golikova (addressing the Minister of Health and Social Development), the rectors of medical higher education institutions have held a congress. What have been the proposals?

Tatyana Golikova: The first Council of Rectors, which we have created, held its meeting at the Ministry of Health and Social Development on May 20 last week. The Council brings together the rectors of 55 medical pharmaceutical higher education institutions. It will be a component of the Russian Union of Rectors. The Council is called upon to develop proposals on behalf of the professional community for improving educational legislation with regard to medical and pharmaceutical higher education institutions. The initiative to create the Council was put forth by the Ministry of Health and Social Development jointly with United Russia. The Council includes representatives of United Russia. It will form joint proposals both on current work and on legislation. We have decided that the Presidium of the Council of Rectors will be headed by Gennady Kotelnikov, the rector of the Samara Academy. The Presidium will have meetings every month and the Council of Rectors, which includes ex officio members, will have its meetings as the need arises.

Vladimir Putin: Mr Gordeyev (addressing Minister of Agriculture Alexei Gordeyev), are you going to Rome? When? What will you do there?

Alexei Gordeyev: A conference sponsored by the UN Food and Agricultural Organisation will be held in Rome on June 3-5. The topic is world food security and global challenges arising from climate change and the development of bio-fuels. The heads of state and government as well as agriculture, forestry and fishery ministers have been invited.

Among the speakers will be the Italian President, the UN Secretary-General and the FAO Director-General. The aim of the Conference is to discuss the situation in the world in connection with the sharp growth of food prices and to develop corresponding measures the international community can take to stabilise the situation. The conference is expected to adopt a final declaration. We are currently working on the documents and forming the delegation together with the Foreign Ministry. I am to deliver a report on behalf of the Russian Federation.

Vladimir Putin: Thank you. Since we have touched on agriculture, I would like to draw the attention of Viktor Zubkov and Igor Shuvalov to what we have agreed upon during our meeting on agriculture in Yessentuki. I am referring to the protection of the interests of domestic producers and the progress of the negotiations on Russia's accession to the World Trade Organisation.

Igor Shuvalov: that is a very important task. We have had tentative consultations with Viktor Zubkov. We will probably need two weeks before we are ready to report back to you.

Vladimir Putin: Alexander Zhukov (addressing Deputy Prime Minister Alexander Zhukov), in connection with a pleasant event, the victory of our singer in the Eurovision contest, we should try to make the appropriate preparations for a similar contest in Russia next year. Please pay due attention to the event and do everything to hold it at the highest level.

Let us get down to the items on our agenda today.

Of late we have been talking a great deal about the medium-term programme of the country's development, the long-term programme of economic development to 2020 and in some areas for a still more distant future. Naturally, taxation is one of the most effective instruments the government can use to ensure the high rate of economic growth and address social problems.

Today we will discuss new developments in this area. These developments, whatever their other components, must have an obvious social aspect. You know that we are to submit these proposals to the State Duma shortly. I would like to speak about them in more detail.

First, the tax burden on citizens who are bringing up children will decrease. The non-taxable sum of income tax will increase from 600 to 800 roubles a month for every child. That is not a lot of money, but at least something will be kept by the families and will remain in the family budget. I will speak about other items in a moment. If you take them all together, I hope the results will be more meaningful.

Tax breaks will be granted to those who use the services of education and health and those who buy or build housing. A maximum amount of money employers spend for these purposes in the interests of their employees will be allowed to be included in production costs. Consequently, these moneys will be exempt from the profit tax. Let me elaborate.

The legal entities that spend money on the education of their employees will be fully exempt from taxes. We have singled out these formulas together with Alexei Kudrin. I hope they will be passed by the State Duma.

The amount of money to be spent on medical insurance for employees and to be included in costs will increase from 3% to 6% of the wage fund. That is not a negligible sum.

Three percent of the wage fund will also be allowed to be included in costs if the money is spent to pay interest on housing construction and acquisition loans.

Let me remind you that a law has already been passed which exempts the money citizens and organisations contribute to co-financing of pensions from the income tax, the single social tax and the profit tax.

Additional measures to support R&D are to be implemented beginning in 2009. We all keep talking about an innovative economy. Of course the tax policy should pay special attention to this type of activity. We are talking about priority areas of research and development. These priority segments will have to be identified by the Government.

I propose to increase by 50% the expenditure that can be written off as costs in the conduct of such work, even if, to the regret of the scientists, they yield a negative result. That is a novel provision. We did not have it previously, but we must admit that the people engaged in research activities must feel financially secure and must be aware that the state shows concern for their activities, understands their problems and is ready to support them.

We should make up our minds about further liberalisation of the amortisation policy. We have already made some decisions on the issue. Still, we must think about further steps. Business must have additional opportunities to apply fast-track depreciation rules.

Increasing oil extraction and stimulating oil processing is an important challenge. A whole series of measures must be taken. They include increasing the non-taxable minimum in calculating the rate of the mineral extraction tax from $9 to $15 per barrel. Additional tax incentives must be provided for those who develop fields that are hard of access or depleted. I have already spoken about it. Simultaneously the system of accounting for the amount of crude extracted must be improved. Previously, as you know, although such fields were entitled to certain preferences, it was practically impossible to exercise them.

Excise taxes on more environment-friendly petrol and diesel fuel grades will be cut. While excise for class 4 and 5 quality petrol will be 3,170 roubles per tonne, excise on ecologically polluting fuel will be 3,900 roubles per tonne. That should provide an incentive for the retooling of our oil refineries.

We should open up new opportunities for private entrepreneurs, small business and farmers to use simplified taxation schedules. The list of activities that patent holders can engage in is to be substantially enlarged. Patent holders should be allowed to hire up to five employees without adopting a more complicated system of taxation and reporting.

Let me stress that the small business sector is particularly sensitive to the quality of tax administration. We need further actions to improve it. I am referring to the law enforcement practice, a transparent and understandable system of tax collection and reduction of the number of tax report documents. I think small businesses must hand in tax returns not more than once a year. As it is, they are submitted quarterly.

And finally, before the end of summer, proposals are to be tabled for creating a favourable tax schedule for financial market transactions. As I have mentioned, we do not, unfortunately, have our own legislation. Market participants often use the legislation of foreign states.

I would like to stress that the decisions taken today will provide the basis for the formation of the budget. All the priority draft laws should be introduced at the State Duma as quickly as possible, this week.

Our agenda includes issues directly connected with providing better social guarantees for our citizens: veterans, disabled people and families with children.

The immediate task is effective implementation of the recently issued presidential decrees. I am referring to providing all the World War II veterans with housing, and also to providing veterans and disabled people with special cars or paying them a lump-sum compensation.

Allocations for these purposes should be duly included in the amendments to this year's budget and in the law on the budget for the next three-year fiscal period.

For your information, before May 1, 2010, 55,000 World War II veterans will move to better housing. That will require an estimated extra 30 billion roubles.

In 2008, 33,000 veterans of World War II and other military actions must all get special cars or a corresponding compensation.

In 2009persons who have been victims of radiation or have been rehabilitated will get special cars or compensation. Compensation for health reasons and for disabled children will be paid in the amount of 52,500 roubles.

The federal budget spending on these purposes will amount to 4.4 billion roubles in 2008 and 5.5 billion roubles in 2009.

Special attention must be paid to measures aimed at increasing the real incomes of war veterans, pensioners, families with children and disadvantaged people.

Beginning from August 1 we will increase by 15% the basic part of the labour pension and all types of social pensions. Insurance for the labour pension will also be adjusted for inflation.

It is necessary to consider further indexation of child allowances and monthly money allowances.

We have spoken about it, we have promised an increase to our citizens. It must be put into the budget.

We will also look at the state of affairs in the field of social and medical services provided for veterans and disabled people. I urge you to pay attention to the need to improve home care services for these citizens and the conditions of their treatment at medical institutions.

I expect to hear from you, Ms Golikova, proposals on all these matters.

We will also look at current matters, including our work in May and June.