April Conference Features Discussion of Ways to Boost Budget Revenue

Budget policy remains one of the government’s key tools for improving quality of life and solving problems concerning poverty and inequality. But in order for the budget to grow, additional sources of revenue are needed. The first plenary session of the XIX April International Academic Conference on Economic and Social Development featured a discussion of what these sources might look like.

Financing sources for economic growth can be found by redistributing current spending and directing it towards priority areas, says Russian Finance Minister Anton Siluanov. (In an address to the Federal Assembly Russian President Vladimir Putin ordered that growth rates be increased above world averages.) Currently 33% of GDP is distributed through the budget. Additional revenue sources can be found by proving the quality of how tax and customs payments are administrated, Siluanov adds. Tax revenues from increased efficiency within the Federal Tax Service and Federal Customs Service and from the introduction of digital services have alone increased by 1.5% of GDP over the last four years. ‘A fairer distribution of the tax burden will provide an additional 1% of GDP or so through economic revitalisation,’ he adds.

Additionally, the Finance Ministry is expecting increased investment activity and more participants in infrastructure projects. ‘Infrastructure mortgages’ should help with this – talks on this matter are concluding within the government – as should a project-financing factory that is part of Vnesheconombank (VEB). The government is also promising a fiscal neutrality principle for private businesses; that is, no tax innovations will hurt the existing tax burden, Siluanov says.

In the social sphere, Siluanov promised to move towards targeted forms of social assistance, which would increase support for those who truly need it, while remaining aid can be redistributed towards education and healthcare.

The Finance Ministry underestimates how ready citizens are for partially subsidized social services, HSE Rector Yaroslav Kuzminov notes. ‘The surveys we’ve conducted show that half of citizens would approve of a 2% increase in their tax burden as long as they themselves could choose how to spend it,’ he says. ‘It goes without saying that these are local and regional taxes. It is this potential that should be utilized,’ Kuzminov concludes.

Siluanov says he is unsure that self-taxation would take off. ‘We have other areas for attracting resources. I am skeptical of increasing the burden for our citizens.’ Self-taxation could be voluntary and directed towards things such as pension savings, Siluanov says, adding that people should be given the opportunity to use these funds during their careers.

Another issue concerns the regional budgets. During the 2014-2016 crisis, the Russian regions’ budget revenue declined considerably and has only started growing over the last year. At the same time the situation varies across the different federal subjects of Russia, and Siluanov promises to help the regions find sources of revenue. ‘Tax-related changes might lead to us redistributing resources in this way [without changing the relative percentages] so that the regions have enough funding to meet their obligations on the one hand and to grow on the other,’ he notes.

Unfunded mandates are a serious problem for the regions, HSE First Vice Rector Lev Jakobson believes. They arise when the federal centre transfers the obligation to finance spending to a different regional level without reinforcing additional financing sources. ‘The breadth of authority is unbearable for the majority of regions and municipalities. Let’s look the truth in the face and make them different for different territories,’ Jakobson concludes.