Page 51 - RusRPTDec18

6.1.1 Budget dynamics - specific issues...
The Russian federal budget printed a surplus of RUB3 trillion or 3.6% of GDP in the first ten months of this year -- the first surplus since 2011.
Russia’s federal budget revenues were RUB15.8 trillion ($233bn) in January-October 2018, exceeded expenditures of RUB12.78 trillion by RUB3.02 trillion ($44.1bn) handing the government a surplus of 3.6% of GDP, the Ministry of Finance reported on November 13.
The primary surplus, that excludes the cost of servicing public debt was even higher at 4.5% of GDP.
In the remaining two months of the year, revenues move in line with projections and spending matches the plan, the 2018F surplus will total RUB 2.5tn, or 2.5% of GDP.
Accounting fines set to skyrocket. The maximum fine for withholding or failing to provide accounting records will increase 140 times from 5,000 rubles ($75.15) to 700,000 rubles ($10,514) according to the Ministry of Finance. The story points to how MinFin is doing all it can to, on paper, empower tax collection and raise taxes knowing full well that oil rents are no longer reliable a reliable source of budget stability. Increased fines will hurt medium-sized businesses required to carry out audits in particular, leading to yet more gladhanding and corruption costs in case the results pose a risk for the business in question. But businesses will see little reason to pay real fines of any kind for the next two years since Rosstat is set to lose its legal responsibility for enforcement. Though it will only have an impact on the margins, expect businesses in the regions to take a hit as a result.
● The new rules published by MinFin are set to take effect by 2021.
● Putin signed a law in mid-November that transfers responsibility for the enforcement of the provision of accounting information from Rosstat to
the Federal Tax Service as of 2020.
● The fines depend on whether or not a firm is legally obligated to carry
out or facilitate a state audit of its finances.
The second round of amendments to the federal budget for 2018 has started, and the State Duma recently approved the draft law at the first hearing. The proposed changes imply an increase in revenues of RUB 1.9tn (to RUB 18.9tn), almost totally provided by oil & gas revenues (+RUB 1.6tn). Given this, the revision in spending plans is only +RUB 0.2tn, which raises the surplus to 2.1% of GDP, vs. 0.5% expected in the first amendments.
Non-oil & gas revenues stronger than expected. The government collected RUB 898bn of non-oil & gas revenues. While revenues from VAT on imported goods exactly matched the published figure, domestic VAT and corporate profit tax revenues surprised on the upside.
In the last two months of 2018, the government is to spend 24% of the plan. In October, the federal budget spent RUB 1.4tn, which is in line with the normal seasonal trends. As usual, the speed at, which spending is executed (77% of the first amendments) lags that for revenues. This implies that in December, we shall see a seasonal spike on the spending side again (it was +84.2% m/m in 2017), which would bring the budget surplus down from the
51 RUSSIA Country Report December 2018 www.intellinews.com