Page 51 - RPTRusFeb17

6.1.1 Budget dynamics - specific issues...
The Russian Finance Ministry has reserved the right to use RUB1.8 trillion from the Reserve Fund, as planned in the budget for 2017, M inister Anton Siluanov said at a meeting of the ministry on February 8. “We reserve the right to use the money of the Reserve Fund (and the National Wealth Fund) to the extent envisaged by the budget, RUB1.8 trillion. Nevertheless, we will participate on the foreign exchange market in the form of purchase with the additional income which we will get (from the oil price rise),” Siluanov said.
Siluanov said that the purchased foreign currency will replenish the Reserve Fund at the beginning of 2018 under the current legislation. The Finance Ministry said it will acquire a RUB6.3bn ruble equivalent of foreign currency daily from February 8 to March 6 and spend the entire windfall revenue from energy sales planned for February, or RUB113.1bn Earlier in January, President Vladimir Putin supported a government idea to spend any windfall energy revenue to replenish the Reserve Fund and the National Wealth Fund in 2017. The revenue will be considered windfall if the oil price exceeds $40 per barrel, the official forecast.
Procurement by the state and state-owned enterprises (SOE) made up just under a third (30%) of GDP in 2016, a ccording to official figures. The economy ministry reports that public procurements in Russia last year were valued at RUB5.3 trillion (€72bn) and procurements of state-owned enterprises were valued at RUB21.1 trillion (€285bn) – not including procurements classified as secret, which has been a growing budget item . Six years ago, every tenth ruble of federal spending was spent on secret budget items, but this year it is one in five, according to proposed amendments to the budget from earlier this year. If the changes are passed by parliament, classified spending will grow RUB680bn over the initial budget, to RUB3.7 trillion (over 22% of overall spending). To increase efficiency and transparency, procurements should be carried out by electronic competitive bidding. The economy ministry reports that last year two-thirds of public sector procurements were subject to competitive bidding, but only 5% of those by SOEs. Lately, procurements have been used increasingly as a tool of industrial policy, thereby reducing competition and raising prices. Among other things, many import restrictions have been imposed on public sector procurements.
The Duma discussed legislation that would crack down on undue tax benefits in February . In order to crack down on companies conducting business simply to reduce their tax burdens, the Federal Tax Service (FTS) may add taxes to violators, or refuse VAT deductions. While such rules have existed in jurisprudence for some time, the Duma measure would make them concrete in legislation, setting out when companies can or cannot claim VAT deductions and clarifying what practices are allowed. Businesses, however, are worried about an overarching ban, claiming that moves to reduce taxes may be part of larger business goals as well. Says Sergei Eremin, senior lawyer at Herbert Smith Freehills, there's a risk that regulators simply refuse deductions without thorough analysis or proof of tax evasion.
6.1.2 Budget dynamics - tax issues
51 RUSSIA Country Report February 2017 www.intellinews.com
Russia's government plans to raise the VAT to 21% to raise RUB836bn (€13.7bn) or 0.91% of GDP in additional budget revenues, Kommersant