The Kremlin's chief adviser said Wednesday that Russia's tax system was out of sync with the country's economy.

"(The current tax system) won't serve the interests of the Russian economy in the next five to seven years and should be changed," Arkady Dvorkovich, director of the Russian president's expert directorate, said at a round table discussion.

He also criticized the government for failing to understand the shortcomings of the current tax system.

"There is no understanding of how deep the problem is," Dvorkovich said.

In Russia, the president is not considered to be part of the government, which is a separate governing body, a cabinet of ministers chaired by the prime minister.

He called for cutting taxes in the high-tech industry and developing voluntary health insurance and pension systems.

Dvorkovich also said that his directorate and the Finance Ministry had agreed to discuss replacing the value-added tax (VAT) with a sales tax.

Dvorkovich has promoted the idea of replacing the VAT with a sales tax for several years, while the Finance Ministry has opposed the idea.

Dvorkovich called for reforming the tax system, including the introduction of a sales tax, before the government submits its draft financial plan, also known as a three-year budget, for 2008-2010 to the lower house of parliament in April 2007.

Otherwise the government will be able to introduce only minor changes to the taxation system in 2008-2010, he said.