In the years 2000 and 2001 the Russian parliament passed tax laws which revolutionised the tax system. The laws on both direct and indirect taxes were substantially altered-with the result that Russia today has a modern and internationally competitive tax system which may even serve as a model for tax reform in the industrialised countries of the West. The following article describes the old tax system, its evolution and its economic effects, outlines the main features of the new system, gives examples for the positive effects it has already had and, finally, makes some propositions for further reform.