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daily reported on February 21, citing an unpublished internal presentation of the Ministry of Economic Development. The '21/21' tax manoeuvre reportedly proposes hiking VAT from the current 18% to 21% as of 2018 or 2019, while lowering the rate of social transfers from the employment fund from 30% to 21%. At the same time, the ministry wants to split the burden of the VAT hike 50/50 between consumers and producers. State sectors of the economy would benefit the most from a '21/21' system, with education and healthcare seeing their tax burden fall by 32-33%, as well as state governance (burden down by 28%), and agriculture (down by 40%), according to Kommersant. Construction, private services, utilities, finance and trade would benefit less from the tax change with gains limited at 5% of the total tax burden decline. Heavy machinery, transportation and communication could gain up to 9% of the tax burden. Meanwhile, unnamed government sources told the daily that '21/21' is not the only tax reform scheme currently being discussed.
Plans being discussed at MinFin, MinEcon, and Alexei Kudrin's Center for Strategic Planning may include tax increases on households. Economists at all three see the possibility of an increase in the income tax rate, which would become quasi-progressive with the introduction of a minimum taxable income. As reported earlier, other measures would see the VAT increased at the expensive of insurance premiums. Minfin is discussing raising income taxes to 15% (up from 13%), of which would 6-8% would be allocated to the federal budget (income taxes are the main source of revenue for regional budgets). This would be compensated for by a decrease in insurance premiums paid directly by employers to 21%.
Russia's budget revenues from excise duties on pure alcohol and liquor in 2016 jumped by 20.8% year-on-year to RUB327.6bn (€5.4mn), TASS reported on February 15, citing a government meeting on control over retail alcohol sales. Overall in Russsia there are over 222,000 retail and catering outlets that sell liquor, with 98.9% of those included in the centralised system of monitoring and taxing alcohol sales. From October 2015 to February 2017 authorities made more than 3,200 seizures of equipment for illegal alcohol production, including 8.2mn litres of bootleg alcohol. According to previous reports by the Federal and Regional Centre for Alcohol Markets (TsIFFRA), exports of Russian vodka in 2016 increased by 14% y/y to 49mn litres. The growth was triggered by growing vodka output in Russia, with volumes increasing 16% y/y, TsIFFRA said.
6.1.3 Budget dynamics - funding, privatization
The Russian government approved a privatization program for 2017-2019
at the start of February to cover the budget deficit this year. Russian Prime Minister Dmitry Medvedev told the government meeting he expects the budget to earn RUB17bn ($285.30mn) in 2017-19 from the privatization of state assets.
Russia is set to reduce its stakes in Sovcomflot, a state shipping company, to 25% plus one share, and its stake in state diamond miner Alrosa to 29% plus one share.
There is no need to privatise Russian national air carrier Aeroflot in the near future , Transport Minister Maksim Sokolov told Rossiya 24 TV channel on February 20, in the latest case of government back-peddling from earlier plans to sell off state assets. The share of the state in Aeroflot is slightly larger than 50%,
52 RUSSIA Country Report February 2017 www.intellinews.com