The government plans to start economizing

The government of Russian Federation resorts to economizing measures, as a result of stagnation of industrial production and rise in the budget deficit under increased social expenditures for pre-election promises of the President. The stagnation is observable in the world financial market for several quarters running.

In the preparation of the draft budget for the nearest three years, the Minister of Finance of Russian Federation Anton Siluanov outlined specific steps, focused on encouragement of receipts to budget revenues and its deficit reduction by MET increase and VAT revocation refund for several manufacturing sectors.

It is said that orderly MET increase under simultaneously reducing of export tax on oil and oil products allows getting to budget 35 billion rubles in 2014, 67 billion rubles in 2015 and 72 billion rubles in 2016. Obviously, with such an act the Cabinet intends to refill the budget using excise tax, due to the fact that oil products prime cost will rise with high probability within Russian market. This step is a controversial one, for the appreciation of fuel will perform a price escalation in other economic sectors. It will lead to accelerating the inflation dynamics, the decline of which is declared by the President as a strategic target.

In addition, plans call for cancel of VAT refund for exporters of primary production in wood processing and fishing industries. On the one hand this step aimed to replenish the budget, on the other – it is declared that this measure is focused on encouragement of domestic processing of the primary raw material. But it is also necessary to take into account that many companies stay up by means of privileged export of primary production abroad, considering that domestic buyers offer incomparably smaller price. Is there a chance for wood processing and fishing enterprises to ensure profitability under appreciation of export, or to build manufactures in the country, is questioned. Moreover, due to our recent accession to the WTO, we hit Russian export by these steps.

Thus, we are forced to state that innovating growth of economics and industrial diversification are again being put off indefinitely. It is planned to patch budget holes by means of increase of total tax burden for companies and citizens.