Page 53 - RUSRptOct18

registration. For example, if more than five companies are already at the company's address or it is registered in a destroyed building, the Federal Tax Service requests clarification of the information.
The government will consider the Ministry of Finance’s 2019-21 budget proposal on September 20 , which foresees steady expenditures around 17% GDP over the next three years and revenues ranging from 18.7% GDP in 2019 to 17.2% GDP in 2021. Both expenditure and revenue values have grown significantly from the current 2018-20 budget. This is the opening stage of a budget negotiation, so it's too soon to say, which way the wind is blowing. But MinFin's numbers show a prioritization of macroeconomic stability over economic growth. As the government increasingly finances the budget through taxes, its dependence on oil and external shocks decreases. Spending for national projects linked to the May decrees won't be decided until October 1, but expect a flurry of lobbying via proposals and news coverage until then. The reality is that there isn't enough money available to radically change spending patterns and interests are largely entrenched.
● The VAT hike will add RUB500bn ($7.5bn) to the budget in 2019 and RUB600bn ($9bn) in 2020-21. The budget will also receive RUB253bn ($3.8bn) and RUB225bn ($3.4bn) in 2020 and 2021, respectively, from the oil sector tax manoeuvre.
● Pension reform will have a limited effect on the budget. Next year the government will only save on pensions for 80,000 individuals. In 2021, however, two generations will be affected by reform, reducing federal expenditures by RUB161bn ($2.4bn).
● The government’s increased revenue will go toward the implementation of 13 national projects. In 2019-21, MinFin foresees RUB5.5 trillion ($82.9bn) spent on Putin’s May decrees.
● While these funds will, to some extent, be redistributed in later readings of the budget, expenditures are notably higher than in MinFin’s original plan, by roughly 3% according to Alfa bank chief economist Natalia Orlova.
VEB published a macro projection for 2018-2021 with a base case featuring a pension age increase by half a year per year starting in 2020 . The very next day, the projection was deleted from VEB's website. The Minister of Economy announced at the "Russia: New Opportunities" Forum that such an increase is indeed being discussed, with several proposals on the topic already formulated. When prodded by journalists on where such discussions are occurring, he replied "in society." Both stories mark continued paralysis on pension reform, despite an increasingly evident need to do something: the number of workers per pensioner continues to shrink, as do pension benefits in real terms.
Russia's Finance Ministry warned that it would have a RUB204bn ($3.3bn) hole in budget revenues in it if state-owned enterprises (SOE) don’t pay out the 50% of profits they have been ordered to by the government ,InterfaxandV edomosti dailysaidonApril23citingunnamed sources in the government.
MinFin’s complaints is the latest in a running battle between the liberal fraction running Russia’s finances and the heads of Russia’s largest companies, most of whom run their enterprises like personal fiefdoms. MinFin continues to
53 RUSSIA Country Report October 2018 www.intellinews.com