Down with the cheapskate: how tax policies in Russia have stalled

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Raising taxes is only valid subject of public compromise: business and the public agree to some increase in loads, but the government should significantly limit overhead costs

One of the most common suggestions, which addressed and address each other editors of literary magazines, reads: “Let them die scribblers!” Now, watching the tax policy of the Russian authorities want to exclaim: “Let them die people!” and above all, because almost every day there is some new action, unable to turn the tide, but, on the one hand, and so undermines the low confidence of entrepreneurs and citizens to “tax stability” and, on the other hand, does not stimulate economic growth.

“Neat” extortion

Not long ago, the Ministry of Finance suggested to think” about “one percent exaction” on the poverty of our bureaucracy. Among his ideas — an increase of one percentage point of income taxes, value-added, individual income, property tax, and insurance premiums. Earlier it was proposed to increase the excise taxes on tobacco products, to introduce excise duty from the sale of drinks with added sugar and to impose VAT e-Commerce. Often discussed the increasing state company dividends (but what’s underneath to understand, because recently Igor Sechin has told that “Rosneft” formally is not) and new taxes on the oil industry. We have seen the emergence of a “point” of local taxes on retail trade and a sharp increase in inventory estimates for the allocation of property tax. Not only Ministers and governors, but the President himself set off in search of new revenue, while supporting the introduction of the “resort fee” in the amount of 50-100 RUB per person per day, emphasizing (one can not give it justice) that it is worth doing “very carefully, not lifting the payments, unbeknownst to tourists”. In General, the power in Russia seem to have United against businesses and people, considering them all “resting”, and seeks “gently” and “quietly” to Rob them.

Yes, everyone understands that the Treasury did not have enough money, but most expenditure (excluding pensions, of course) is not subject to reduction. At the same time should, in my opinion, to compare the gains from the introduction of new taxes with the potential costs that may be caused by this.

Let’s start with the potential revenue. According to Finance Ministry estimates, “the one percent exaction” can bring the Federal budget from 170 to 324 billion rubles per year, and the excise tax and review taxes on energy suppliers — 670 billion rubles in 2017. As you know, Putin has repeatedly said that no increase in non-oil tax until at least 2018″ is not assumed. In the most optimistic scenario, therefore, the Treasury will receive about $ 1 trillion per year, with the deficit in the first half of the year exceeded 1.5 trillion rubles. other variants are Possible — for example, the introduction of a progressive scale of personal income tax when establishing a non-taxable minimum (but there probably rich Russians “into the shadow” and the beneficiaries of the budget only will lose). The same applies to proposals to extend the insurance charges on all income. In other words, today the government has no ideas that could help balance the budget: all proposals are only palliative moves, pulls the offensive problems, but not solve them.

Oncoming traffic

Therefore, in my opinion, first of all, the authorities should not think about the revenue and the expenditure side of the budget. Today, more than 20% of all spending takes place in secret; almost 38% are “national needs” as well as the expenses of the Ministry of defence and the interior. The real sequester these three articles by 15% just give trillion a year. It is possible to save on public investment: their multiplier effect is not very large, and abuse in this area is huge. If you apply all the measures, and by cutting costs and through the introduction of some new taxes the budget will be balanced.

In other words, the most important principle of the budget policy in the current situation must be a kind of “social compromise”: business and the public agree to some tax increase with the proviso that the ruling elite is significantly restricts the unproductive consumption and costs associated primarily with the control by the taxpayers. Both sides — those who pay and those who spend, have to make concessions and to abandon approximately equal amounts. This kind of open dialogue between the authorities and society, not behind the scenes preparations for the tax hikes the country can “sell” without causing a serious disturbance “bottom”.

Where to get money

Moreover, if the move to raise taxes, then that should significantly change the tax system and affect not so much citizens, how many large companies.

The least you should take action that will bring the budget “two cents”, but can cause the obvious popular discontent. This category refers to and the “resort fee” (which is easier then to allocate to regions small grants), and tax on shopping on the Internet (people now it is important at least for something to save), and the excise taxes on tobacco and soft drinks (give a little bit, but will affect the millions). The brunt of the new taxes I think should be on resource companies that they have significantly benefited from the devaluation, since a significant proportion of sales are to foreign markets, which is not practical in any industry.

Drastic measure in this case would not increase income tax or property, and a trivial lifting of the export VAT refund. In 2015 in Russia was collected of 5.04 trillion rubles, VAT from the sale of goods and services in the domestic market and offset of 1.98 trillion rubles of VAT charged when goods are exported abroad. The abolition of this practice (with the possible exception of a small number of positions in consumer and high-tech products would bring to the budget more than all the innovations now proposed by the Ministry of Finance. While this would practically seized only additional funds received by the exporters due to the devaluation of the ruble. No argument that the biggest the raw materials will not build a new pipeline or will not launch new fields are out of date: now is not the time to increase production of oil and gas, and other commodities.

It would be wise to really go to a progressive scale of income tax, such as bringing marginal rate up to 20-24%, and to extend insurance payments for the salary of any size. In this case affected the interests of only a few hundred thousand people, not the majority of the population, especially those who are either seriously benefited from the prevailing practices in the state, or he works for the state. Of course, some portion of the proceeds can go into the shadows, but in any case, the gain will be obvious. Finally, this measure is well within the policy of ensuring minimum social justice in the country with the most unequal distribution of wealth and income in the world. It is possible to offer and other measures that will be received better than trying to Rob those who still ventured to go to have a rest on domestic resorts.

At the same time it is necessary to make the tax system more development-oriented, at least in the industries in which constantly say power. For example, a state could opt out of any tax, except for insurance payments, from farmers and processors of the domestic food raw materials (these sectors represent no more than 1.5% of consolidated budget revenues, but provide jobs to 9.2% of the economically active Russians). Purely a psychological effect from the first during the years of targeted tax cuts would be much larger than all subsidized loans offered by farmers and processors.

The issue for the poor

Finally, you should think about the possibility of “equity” financing of the budget deficit. The Finance Ministry could place additional volumes of government bonds and Central Bank to establish a special regime providing commercial banks with liquidity against the pledge of such. Such “quantitative easing”, designed for 600-800 billion rubles a year, say five or six years, would undermine financial stability and not “hyped” inflation in the face of a catastrophic contraction in demand, but would not raise taxes and, thus, not to kill the business activity. In my opinion, the fallacy of the proposals “Stolypin club” is not in itself the idea of the issue, and that the credits offered to “make” into the economy through large enterprises and to support production that is not marketable. To stimulate demand, that is, to lend to the Finance Ministry to conduct the indexation of pensions and increasing the incomes of low-paid public sector employees, it would now be reasonable.

In other words, it’s time to spend not so much the next debate about structural reforms, the protection of property rights or economic liberalization (all the results of such a “global” discussion will go into the sand), but rather about a significant reform of the budget system. Today the Russian economy is significantly different from what it was ten years ago, but all the changes in the financial system of the country was reduced in the years to small, but frequent and confusing business and citizens adjustments. Perhaps it’s time to move from “cutting out” the next ten billion rubles for something unexpected a program using another exotic collection to the system transformation approach to taxes and budget, because nowhere in the world is economic growth in the conditions of constant tax increases. So is it worth to hope for its resumption in Russia until the abolition of the present “krohoborskie” policy?

The authors ‘ point of view, articles which are published in the section “Opinions” may not coincide with ideas of editorial.

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