2006

STATE BUDGET 2007: GOOD NEWS FOR SOME, BAD NEWS FOR THE OTHERS

New state budget for 2007 will not increase role of the state in the national economy. Quality changes concern most of all tax revenue structure. The most collected ones are the most administrated: VAT in whole and taxes and duties related to import. In addition, role of excises in tax revenue may increase. As a result, share of VAT increased to over a half of all tax revenues, while import-based revenues (including VAT on import) will provide over two fifths of tax revenues. But reimbursement of VAT also increased, what shows governmental (and often mutual) support for large oligarchic groups with exporting companies. At the same time decrease of share of corporate profit tax points to two important issues. First, government and the parliamentary coalition may use state-owned companies in own schemes to accumulate profits in private interests. Second, tax avoidance may be suspected. Revival of the special economic zones with simultaneous 'tax vacations' for corporate profit tax supports this idea. Decrease of revenues based on rent from natural gas and oil transit, despite growing supply of fuel from Russia to Europe, may suggest some additional agreements to have Russian gas prices lower. In general, with new budget for government gets more authorities for manual control over the budget execution. It helps ease life for the selected businesses, which back government and the coalition, and turn the screws on everyone else. As for budget expenses, new budget is indeed in somewhat more spending for bureaucracy, most of all for government itself. This budget is not anti-social, as many populist politicians tend to characterise it. But meantime, this budget project badly provides compensations for increased housing tariffs, which may become also serious political problem soon. Currently government tries to transfer as much money as it can from budget-2006 to budget-2007 to provide resource for such compensations. Finally, new budget did not become more regionally oriented. Less than a quarter of its expensed to be distributed through local budgets. Surely, there is no support for real self-governance reform. Moreover, such a big share of central distribution can help government press the opposition regions.