A positive signal for the Russian economy: decrease of foreign capital outflow

Deputy Minister of economic development Andrei Klepach stated that at the end of 2013 capital outflow from Russia will most probably amount to nearly 60 billion USD. This figure is less than official forecast of the Ministry of Economic Development (MED) – 70 billion USD.

It bears reminding that at the end of August the MED worsened the official forecast on net capital outflow on 2013 more than twice as much – from 30-35 billion USD to 70 billion USD. At the same time, the MED not once stated that slackening of the rates of economic growth in the current year is related to negative situation in the investment field.

Klepach in his representation referred to revision of quarterly results, which turned out to be lower than the forecasted. Thus, first two quarters’ data was specified. As for the third quarter, despite the growth of the outflow comparing with the second quarter, the obtained result was anyway lower than the forecasted.

The Bank of Russia also improved the forecasts on capital outflow on the current year from 67 billion USD to 62 billion USD.
According to the Ministry of Economic Development, the capital outflow for July-August amounted to 16-17 billion USD. At the same time, according to the Central Bank of Russia, net capital exports from Russia accelerated from 7 billion USD in the second quarter to 12,9 billion USD in the third only by the private sector. The capital outflow in the first quarter amounted to 28,2 billion USD. At the end of nine months of the current year the capital outflow amounted to 48,1 billion USD.
Speaking about the capital outflow forecast of the MED in the midterm it should be noted that in the next year the ministry expects the outflow of 25 billion USD, and in 2015, according to the new forecast, the inflow of 10 billion rubles is expected (in the previous forecast the zero value was expected). However the forecast on 2016 remained the same - the MED expects the inflow of 20 billion USD.

It is impossible to find direct links between the capital outflow rate and the quality of the country’s economy under conditions of the modern economy. Today the world’s largest capital exporters are quite successful countries: Germany, Switzerland, Holland, Norway, and also China and Japan. Among the largest importers are not only Italy and Spain (both are in crisis), but also successful USA and Canada and rapidly growing Turkey and Brazil.

The capital outflow is a combination of capital withdrawal, including use of income center displacement on it, that certainly has a bad influence on the economy, as the capital begins to work for another country; international investment of internal economic agents or expansion, that is in whole good for the economy; and finally, the balancing of the previous transactions, for instance repayment of foreign loan. In other words, not all the forms of outflow might be recognized negative even in theory.

The fact that the Russian economy is badly in need of investment is an open secret. But under current conditions even the significant cash inflow won’t change the general economic situation, as it will most likely concentrate in debt instruments of the state corporations and banks and in currency speculation. It won’t exert a significant influence on production modernization and up-coming transition of the economy. Therefore the state-wide capital outflow/inflow should be estimated together with goal analysis of the funds received.

Tax administration reform leads to revocation of business trip certificates

The Federal Tax Service (FTS RF) together with the Ministry of Finance of the Russian Federation has prepared a “roadmap” “Improvement in tax administration”, which is going to be implemented in 2014.

Today in the century of information and communication technology development certain forms of tax reporting seem to be surplus. By 2018 revocation and simplification of some of them will lead to significant cutting of preparation time. Still, the situation is far from perfect. Thus, according to rating “Conduct of business”, annually published by the World Bank, Russia has taken 56 place in 2013, having improved its position on 8 places per year. The rating estimates the countries by three components: total tax rate, amount of payments and time, spent on calculation and payment of tax.

The roadmap was made in order to ease the so-called “administrative barriers” for conducting of business. It includes the next main points, proposed for consideration and passage of it legislatively:

  • disclosure of tax correlation; earlier these documents were internal in the FNS, now they will be published in open access;
  • creation of a single shipping document, which will unite invoice and other documents, revocation of surplus reporting forms, including business trip certificates as late as 2014;
  • change of rules for maintaining accounting records will be published for at least 6 months before the date of entry into force. If it is published at a later time, the deadline of declaration should be extended;
  • organization of preliminary tax explanation (tax consulting) institution in the country;
  • extension of terms of filing accounts up to 5 days, for electronic report – up to 10;
  • reduction in number of required fields for transfer of taxes and charges;
  • permission for employers with payments of social security benefits and leave allowances to be responsible for paying of the income tax simultaneously according to paid sum of benefits and leave allowances during a month;
  • exclusion of duplicative requests of the tax account, being furnished to taxmen earlier;
  • conducting as many as possible operations in electronic form in the course of cooperation of the tax authorities and taxpayers.

If corresponding initiative finds government support, then implementation of the roadmap will surely be a positive signal for business and it will finally improve investment climate in the country.