Transcript of the beginning of the meeting:

Vladimir Putin: Mr Temrezov, how do you assess your republic’s performance in the first quarter this year? What are your immediate goals? I would also like you to report on some traditional social issues like schools, the development of secondary education and increasing teachers’ salaries to the region’s average. And, of course, regarding your healthcare modernisation plans: How many projects are you implementing, how much have you allocated to them, and how fast are they proceeding?  

Rashid Temrezov: I believe that we performed reasonably well in 2011, overall. Regarding our plans for 2012, we did post good results for the first quarter.

As for healthcare modernisation, allocations have been approved at 1.384 billion roubles for 57 healthcare facilities. About 65% of them are in rural areas. We plan to give more attention to regional and district hospitals and rural health centres.

Regarding doctors’ salaries, they have grown above the republic’s average, which itself increased 10% in 2011, and is currently about 15,300 roubles.

Vladimir Putin: Was the increase also due to a change in standards? 

Rashid Temrezov: Yes, certainly. Where the new standards have been introduced, doctors’ salaries are higher. I would also like to point out that the rural doctors programme, which we are implementing, has helped us to attract more doctors to rural regions.

Vladimir Putin: They accept these jobs, do they? 

Rashid Temrezov: Yes, they do, and I would even say with pleasure. The situation with teachers is slightly worse, because we are still lagging behind the republic’s average in this respect, but in accordance with our plans, in the fourth quarter, teachers’ salaries should reach the average for the economy reported in the first quarter.

Vladimir Putin: Sorry, I did not get you. In the fourth quarter this year [teachers’] salaries… 

Rashid Temrezov: …will reach the average for the republic that was reported in the first quarter this year.   

Vladimir Putin: Well, this is not how it should be. The salaries must be raised to the average for the fourth quarter. 

Rashid Temrezov: This year we will reach the average for the economy… 

Vladimir Putin: No, let us try to do our best, as otherwise it will be a game of figures. We must not cheat people, do you agree? The increase will not be large, I’m sure, but it would make a big difference to the budget. Let’s think about ways to do this, to ensure that a teachers’ salary is raised to the average for the economy in the fourth quarter, all right?

Rashid Temrezov: Absolutely, Mr Putin. We also plan to increase our own allocations to raise salaries at preschools. I have to say that we have problems with preschools, but this year we have opened eight kindergartens and plan to build large modern preschools this year, for the first time since 1990. One of them is planned for the republic’s capital, Cherkessk. We want to reduce the waiting list.

Vladimir Putin: There is something I want us to think about. Only recently, just a few days ago, we discussed the development of housing construction. Some people in that meeting said that it would be logical to collect personal income tax at a taxpayers’ place of residence in order to encourage the municipal authorities to expedite the allocation of land plots for construction and to provide other assistance and support to housing construction projects. There are different ways to do that. Those who questioned the measure said it would not be expedient in every region. Tell me now: would it work in your region?   

Rashid Temrezov: Did I get you right that it has been proposed to collect personal income tax at a place of residence rather than employment? 

Vladimir Putin: Yes. Currently, personal income tax is collected at the place of employment as it’s easier for the tax agencies to work with businesses. But when new housing is built in cities, the local governments do not have a lot of motivation to transfer land plots on a timely basis and to otherwise assist in the construction of new housing projects. The reason is that new housing increases the number of people living in a given area, thus increasing budget demands and the burden on the infrastructure, whereas the area’s revenues remain low. They grow, of course, but very insignificantly. 

Rashid Temrezov: I think that in our case it would be better to collect this tax at the place of residence.

Vladimir Putin: At the place of residence? 

Rashid Temrezov: Yes, the place of residence. 

Vladimir Putin: You think this will be more efficient?

Rashid Temrezov: Yes, it will, because many of our municipal districts… 

Vladimir Putin: People are leaving them.

Rashid Temrezov:  Yes, people are leaving for bigger cities…

Vladimir Putin: And so the municipal authorities have a tax shortfall. 

Rashid Temrezov: Yes, they do. Some districts receive more taxes, but most of them stand to lose. 

Vladimir Putin: So the municipal districts where people both live and work will not see any difference, and hence they do not need to change anything. They can continue to collect taxes at the place of employment. 

Rashid Temrezov: Yes, exactly. 

Vladimir Putin: There was also a proposal that made us think, specifically, that if the personal income tax is transferred to an employees address, then the municipal district would not be interested in developing industry. Do you agree? 

Rashid Temrezov: I cannot say that they would not be interested… 

Vladimir Putin: Or that they would hire primarily local residents… It is argued that local governments could influence companies to hire only local residents.  

Rashid Temrezov: No, we are prepared to support the management of any large enterprise. I can assure you of this as chief executive. But I cannot answer your question now; we need to consider the issue separately for each municipal district.

Vladimir Putin: But, theoretically, could a municipal government influence business managers in this way?

Rashid Temrezov: In theory, I think it’s possible. Of course, if a company is the biggest taxpayer and people from other districts seek employment there…

Vladimir Putin: And they will pay taxes there. 

Rashid Temrezov: …but the money will be transferred to other municipalities, then, of course… 

Vladimir Putin: I suggest that you consider this issue in your republic, to see if this risk is real.

Rashid Temrezov:  Yes, certainly.

Vladimir Putin: Good.