Page 17 - RusRPTMar19

2.8 Putin’s generous social programme launched during the state of nation speech
President Vladimir Putin offered a generous package of benefits and tax breaks to the Russian people during his “homely” state of the nation speech on February 20 as the Kremlin switches direction away from modernising its army and back to boosting the quality of life of the people.
The speech stood in stark contrast to his “guns and butter” speech a year ago, but the Kremlin is under increasing political pressure as dissent is rising in the face of stagnating incomes and slow economic growth.
The address focused heavily on supporting Russian families willing to have children and was a follow through on the Kremlin’s previously very successful maternity and natal care reforms that has seen the blow to the population numbers from the 90s crisis considerably softened.
In addition the address announced measures dealing with education, healthcare, infrastructure development and other priorities of the new May Decrees.
And the cost of these extra spending is relatively modest. Minister of Finance Anton Siluanov was quoted estimating the costs of the package of new measures at RUB100-120bn ($1.5bn- $1.8bn) annually out of total annual budget spending of around RUB16 trillion.
The sources of funding will be, ”identified during the execution of the budget,”, which, analysts at VTB Capital (VTBC) believe, means that the Government expects the new spending can be covered simply by further improving tax collection efficiency as well as the reallocation of funds within the budget. Russia tax take has been rising as it clamps down on corruption and makes use of a new IT system; in 2018 tax revenues were up by a whopping 23% despite the fact that the tax burden didn't change.
Economists Alexander Isakov and Petr Grishin at VTBC laid out some of the detail of the promises in a note on February 21 which includes:
· Most of the ‘demographics’ measures will also help achieve goals set for residential construction and the cost of mortgage lending. They are as follows: First, the loosen the eligibility criteria for a means-tested benefit for the first or second birth/adoption, which was introduced in late 2017 in #418-FZ: instead of 1.5x the subsistence wage per person, the threshold has been lifted to 2x the subsistence wage. This, according to the government’s estimates, would reach 70% of families having their first or second child.
· Increasing property tax breaks for families with three or more children.
· The period of subsidisation of mortgage interest at 6% for families having a second or subsequent child was extended from up to five years to the whole life of the loan.
· Also, for families having their third child, the President proposed to repay RUB450,000 of the outstanding mortgage loan.
· The wider public would receive the ability to qualify for mortgage payment holidays if a person experiences a temporary loss of the ability to service the debt consistently.
· For healthcare and educational private sector companies, the President proposed setting the 0% profit tax permanently.
17 RUSSIA Country Report March 2019 www.intellinews.com