Page 10 - RusRPTJul24

Siluanov shook off the disastrous budget deficit releases at the start of the year and repeated that Russia would end 2023 with a 2% of GDP deficit, which is what happened. However, he also said that if Ministry of Finance (MinFin) was struggling to close the funding gap, taxes would be raised. That also happened.
This year, the discussion started with fulfilling President Vladimir Putin's directive to elevate Russia into the top four economies in the world by purchasing power parity. However, as the World Bank just announced that already happened, and actually already happened in 2021 when Russia’s economy overtook that of Japan’s, the technocrats shifted their focus to six-year goals, The Bell reports.
Elvira Nabiullina, Governor of the Central Bank of Russia, emphasized the development of the capital market to provide alternatives to public investment after foreign investors, who used to make up some 40% of the market’s capital, fled en masse after Russia’s invasion of Ukraine in 2022.
Economic Development Minister Maxim Reshetnikov highlighted the need for increased labour productivity, which has been falling and is one of Russia’s most painful problems. After mentioning productivity briefly, this topic was not revisited.
Presidential aide Maxim Oreshkin stressed the importance of “ensuring sovereignty at three levels”: the armed forces, culture, and economy. When questioned about the economy's third-place ranking, Oreshkin stated, “there can be no successful economy without a successful army.”
Putin has recently suggested a revolutionary upgrade to progressive income and profit taxes in the first major change to the system since he took office two decades ago.
However, tax reform discussions were sparse at the SPIEF economic session. Nabiullina did not defend the tax reform proposal when reminded that last year's session deemed tax increases counterproductive for business. Oreshkin clarified that taxes are being raised with a system of deductions in exchange for investments, eliminating the need to discuss counterproductivity. However, small-and medium-sized businesses under the simplified procedure now face the obligation to pay VAT without deductions. Additionally, the promised investment deductions for large businesses are not as favourable as first hoped.
The changes in the system are expected to generate some RUB2.6 trillion of fresh revenue, about the same amount as this year’s deficit is expected to be.
During a special session on taxes, Alexander Shokhin, head of the big business lobbying group, the Russian Union of Industrialists and Entrepreneurs, sought a promise from ministers to make investment deductions automatic rather than project-specific. However, Reshetnikov pre-emptively declined this request. Russia’s big business have said they are not against paying more tax, but what they really want is more predictability in the system. In the last year, in an effort to raise extra revenues, MinFin has
10 RUSSIA Country Report July 2024 www.intellinews.com