Russian economy exhausted growth resource

In view of deteriorating situation in domestic economy, IMF lowered forecasts of Russian GDP growth to 1,5% from с 2,5% in 2013 and to 3% from 3,25% in 2014. Under these deplorable figures experts note that unemployment rate is historically low and capacity utilization has reached pre-crisis level. Among other things, price on hydrocarbon (basis of country’s export) continues to stay on the high level for several years running. Obviously, present growth model has run its course.

Increase of the tax burden with simultaneous build-up of government expenditures is a temporary measure that won’t lead to quality change of situation. On the contrary it will enhance uncertainty in future.

Russian officials are more optimistic in their forecasts. Thus, the head of the Ministry of Economic Development and Trade Alexei Ulyukaev stated that January-September the GDP growth worked out 1,5%, and in the end of year it should be 1,8%. In a panel session of Foreign Investment Advisory Council, which includes the leaders of largest world companies, the Prime Minister of Russia Dmitry Medvedev gave an opinion that in 2013 economy will be up by 2%.

In order to bring the country to other level of technological development and living standards, it is necessary to change corporate style of management, to increase labor efficiency, to encourage investments, to make rules for business maximum transparent and predictable, but not to change legal system every year. It must be admitted that we haven’t got far in solving these problems. Thus, as an example, we should mention a growing investment outflow from the country, which has worked out in monetary terms 48 billion dollars for 9 months of 2013.

We may conclude that the country will continue to drown in the stagnation, the exit from which might be delayed for an indefinite period, if there are no new reforms and no positive signals to business.

Tax evaders will be caught abroad

Hiding from taxes will not be possible abroad now. The Ministry of Finance has prepared a number of amendments to the Tax Code, which provides the inspections and search of evaders jointly with foreign colleagues.

Russian tax representatives will be able to go abroad and verify the domestic tax evaders in cooperation with foreign colleagues. At the same time, foreign tax authorities will also have the right to seek their debtors in Russia.

The amendments made will allow the tax authorities to search for defaulters abroad by a number of articles, such as income and individual property tax, profit tax and property of the organizations tax, value-added tax, land, transport, agriculture and water taxes. Excises, tax on the extraction of commercial minerals, tax on gambling industry, tax on payments, which are relying to the budget in case of the simplified taxation system, are also included in the list.

The search of tax evaders will be based on a standard agreement about an exchange of tax information. The agreement was developed by the Ministry of Finance in association with Federal Tax Service. This agreement will form the basis for signing of bilateral arrangements with foreign countries, including offshore and low-tax areas. First of all Russia needs to ratify the Joint Council of Europe/OECD Convention on Mutual Administrative Assistance in Tax Matters, which was signed in 2011. Today our country has only the right to accept information from foreign tax authorities, but the Federal Tax Service can’t carry out checks abroad.

In situation, when many states faced the problem of budget shortfalls, such measures can significantly increase the revenue side of the budget. The exact amount which will manage to be returned to the Russian treasury during such “field checks” is difficult to predict. Experts name only hypothetical sums. According to the experts, about 30 billion dollars were brought out of Russia to the Cyprus offshore areas for the last 20 years.

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