The Ministry of Finance tells to bite the bullet

According to the Minister of Finance Anton Siluanov, the Ministry proposes to slacken the budget rule while putting a maximum limit of federal budget expenses for a year. Prior to this it is necessary to refuse the deficit characteristic of 1% GDP. It is offered to give up the current mechanism for two years.

According to the current budget rule, the maximum expenses volume of the budget for a year is determined by the formula: revenues calculated on the basis of 10-year oil price plus 1% GDP.

Earlier the Prime Minister Dmitry Medvedev stated that it is necessary to reconsider the current budget rule.
It will be difficult to set the treasury for the nearest two years following the current budget rules. Besides, in order to stabilize and bring the budget into balance, the reduction of the state expenses is inevitable.

The State sets out the foreground items, which can’t be reduced in 2016-2017 by reference to former solutions of the nation’s leadership. These are public obligations to the citizens, transfers to non-budgetary funds, expenses for defense and security, provision of medicines, agriculture support, world football championship preparations, occupational training, labor compensation to Russian ambassadors, judges and members of judiciary and legislative bodies. It is proposed that the Government House is to provide the general 5% reduction of the reasonable expenses required by the President using the rest of the budget expenditures.

In order to achieve such reduction, the authority of Alexey Ulyukaev proposes to restructure the expenditure budget, to overhaul the adopted state programs and to change the goals of the social and economic development of the Russian Federation.

    At the same time, the four blocks of the state programs are set to reduce the budget expenses as much as possible:
  • As for the block «Balanced regional development» it is planned to reduce the expenses by 9% in 2016 and by 9,4% in 2017.
  • As for the block «Innovative development and modernization of the economy» it is proposed to allocate 4% less in 2016 and 5,7% less in 2017.
  • The reduction related to the block «New living standards» will amount to 3,1% in 2016 and 6,2% in 2017.
  • Expenses for the block «Effective state» are proposed to be reduced by 2,6% in 2016 and by 5,6% in 2017.

As envisioned by the Ministry of Economic Affairs, the period of the economy will end in 2018 when the recovery to the budget rule on the background of the whole consolidation of the economics allows adding to the stated programs about RUB 600 billion in reference to the rate of 2017.

At the same time the role of the financial bodies in determining of the guiding lines for the country development in the new macroeconomic and geopolitical environment remains not clear. Meanwhile we see the reduction of the expenditure budget post factum, without offering of new growing points and structural reforms of the economics.

The Government approved to reduce the period of registration for new legal entities

A bill of the reduction of period of registration from five to three days for individual entrepreneurs and legal entities, which are established for the first time, was introduced in the State Duma. According to the Prime-Minister of the Russian Federation Dmitrii Medvedev, the simplification of registration procedure will make the Russian business environment more attractive both for domestic and foreign investors.

The Prime-Minister also noted, that the reduction of period of registration will positively influence on the position of Russia in the international DoingBusiness rating. The rating is annually published by the World Bank and estimates the profitableness of doing business in different countries. According to 2014 results, Russia took the 62 place among 189 countries; the leader of the rating is Singapore.

However, the business-community representatives think, that the reduction of legally established terms for registration of legal entities and individual entrepreneurs won’t significantly influence on business activity level. The businessmen note, that today the difficulties are caused not by the procedure duration, but by the number of forms, which are required to fill. Thus, the most popular reason of denial of registration is the mismatch of submitted application form to the established requirements. The application form must be simplified as much as possible or the staff of registration authority must be obligated to make an application at the place of handling in order to optimize the registration process.

It should be reminded, that the bill was developed by the Ministry of Economic Development of the Russian Federation in the summer 2014. The original version obligated banks to make a decision about opening of the account within 10 days. However this offer was excluded from the final version of the project, as the Central Bank didn’t support it.