Russian Federation Urged To Urgently Raise Taxes To Save The Budget
Russian Federation Urged To Urgently Raise Taxes To Save The Budget
The Russian treasury has been hit by the reduction of oil and gas revenues and the deterioration of the economy.
The Russian treasury has been hit by the reduction of oil and gas revenues and the deterioration of the economy.
The Russian authorities need to look for additional revenues for the treasury, which has been hit by the reduction of oil and gas revenues and the worsening situation in the economy. The head of the Federation Council Committee on Budget and Financial Markets Anatoly Artamonov said this on Wednesday, The Moscow Times reports (link to article in Russian).
The senator said measures need to be taken "urgently" as "assessments of economic indicators" have become "more pessimistic" and commodity revenues are declining.
"We need to use all available resources to increase the revenue base," Artamonov urged. In particular, he said, it is necessary to consider the abolition of some tax benefits, the amount of which has now reached one third of the federal budget.
In addition, Artamonov continued, the level of shadow employment in Russia remains high, when individuals avoid paying income tax and contributions to social funds. We are talking, in particular, about salaries "in envelopes", the volume of which was previously estimated by the authorities at 10 trillion rubles a year.
Also, "our persistent reluctance to deal with privatization issues is perplexing," the senator said, adding that all the measures he listed are "reserves to replenish the budget" (quoted by Interfax).
Money is increasingly needed by the federal treasury, which spends every third ruble on the war - a record share since the Soviet Union. According to the Ministry of Finance, oil and gas revenues fell by 17% in the first half of this year, while total revenues grew by only 3%, meaning that in real terms (adjusted for inflation) they began to shrink. At the same time, expenditures jumped by 20%. As a result, in six months the budget has a "hole" of 3.7 trillion rubles - 6 times more than in the same period a year ago.
Reserves for patching budget "holes" are nearing exhaustion: the liquid assets of the National Welfare Fund, which before the war reached $120 billion, by July 1, 2025 reduced to $52.6 billion, that is, almost 2.5 times. If oil prices remain low, this reserve will be completely used up as early as next year, economists at the Russian Academy of National Economy and Public Administration warned.
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Money is increasingly needed by the federal treasury, which spends every third ruble on the war
Woah, 1/3rd of the budget is a lot.
They shifted their entire economy onto war footing. That means they're in it for the long haul because they've basically gambled the future of the country on it.
Yeah, there is no real way out for Putin. If he stops this war, his economy is in ruins. Even if sanctions are lifted, the world has gotten new suppliers for russian goods and even for russian oil & gas. Germany e.g. is rapidly changing its energy economy and won't buy as much gas as before. Millions of men will come back from the war, heavily traumatized and no real job prospects.
But even if Ukraine falls, he wins and Russia occupies the country: There will be a mass scale guerrilla warfare in a ruined country where many people fled. Sanctions will continue and what is left of Ukraine won't restore the russian economy.
And the war might still go on for a while, but it is totally unsustainable in the long run.
Plus, many people won't do business with them anyway.
Their only exit is either to win and progress towards the west, or split up and "rebrand" each region as not-russia.
Russia has billions in frozen assets and they sell oil at a discount. Putin has the money for massive infrastructure spending to grow the economy, if he wanted to.
if there wasn't the demographical bomb on its way, with over 10 million workers missing until 2030 and rising afterwards. There is no easy way out anymore.
In some EU countries that is the correspondent 5% GDP NATO spending goal.
E.g. if Germany would spend 5% of GDP on military, that would be about half of the current federal budget, so it would become a third of the federal budget if other spending isn't slashed.
Imo. this "defence infrastructure..." category is nonsense.
It can encompass anything and everything, or there could be pressure that only LNG Terminals for US gas and concrete bunkers are considered "resilience". Also it ties general infrastructure spending to questions of defense and "preparedness" where it might not be applicable.
Rather than saying "we need to spend X% on defense" the question should be: "which capabilities do we need?" and derive the costs from there.
in eastern nato countries there is logistical problem because army suddenly switched from 40 ton tanks to 70 ton tanks, for example, and old bridges or rail can't support them. this is just one of many small examples that add to that problem, and of course 99% of the time the stronger bridge will be used by civilians
So it is a capability that needs to be built. But building that capability should not be dependent on Trumps ramblings.
Problem is say for instance some small bridge in some village needs to be renewed. It is scheduled to cost 5 Million and be suitable for up to 7t trucks passing it. Now because some quota needs to be filled, instead a bridge for 70 ton tanks is built and cost 30 million.
The 5 Million bridge could have been built by a local company. The 30 million bridge needs one of few national specialists to build it. So now it gets delayed further as these companies have more contracts in the pipeline while smaller companies starve.
These types of quotas that are not based on actual needs create bad economic incentives and they create an environment which helps to foster corruption.
It all depends on how it all will get managed, but there are already longer term infrastructure projects that now got some funding and now also it counts under 5% NATO target. I think that more resources will go towards rail infrastructure, bridges are just more illustrative, but still for a couple of these village 7 ton level bridge there will be one 30 ton bridge in town nearby that will get overhauled
It all depends on how it all will get managed,
Which is why i am bothered by these quotas. They create an environment for mismanagement. Maybe i am also more sensitive to it in general, because we see a lot of it in Germany, in particular with the military equipment procurement being riddled with corruption, inefficiencies and incompetence. I am worried the same will expand to general infrastructure as well.
well, i see a large category of infrastructure problems (that will be 99% civilian use anyway - and not only transport, also telecomms, you can even put healthcare training in there) that is solvable by pouring money at them, and now it's politically convenient to let it rip even among pro-austerity neoliberals. if you want an example of what can this do, look at eastern eu countries and how they changed after funding went in
I agree that the spending is needed. If we tie it to "defense" though, what will happen if there is no threat to defend against?
In a way we saw this already in Germany in the 90s where a lot of disaster relief structures like alarm sirens, emergency communications, technical equipment for excavations, mobile generators and the like has been left to rot, because the cold war had ended (or it seemed so at the time). When we got his by natural disasters like floods and forest fires, the resources weren't there to quickly manage the situations.
I understand the opportunist approach to taking the funding while we get it, but it doesn't solve the underlying problem of neoliberalism. Instead it will come back double with the next wave of austerity being argued even harsher because of all that defense spending (whether direct or in "defense infrastructure") and debt.
3.5% is roughly what is needed to bring a military like the Bundeswehr to a level to fight a large scale war within a few years. Most of Europe is in a similar situation to Germany here.
The 1.5% are just a way to appease Trump. It is easy to pick some budget items, which would have been paid anyway, and call them defence spending. In the case of Germany it is actually even better, as Germany has recently changed its consitutional debt brake to include defence spending. So this basically opens up the debt brake to pretty much any sort of infrastructure spending.....
which ones? germany has government spending at 48% of gdp https://en.wikipedia.org/wiki/List_of_countries_by_government_spending_as_percentage_of_GDP so 5% of gdp for defense will be closer to 1/10 of all government spending
going by 2024 numbers, russians putting third of government spending to defence would be closer to 13% gdp
These numbers are not reflecting the federal budget. The article is referring to Russias federal budget. Your numbers include all public spending, mostly retirement and healthcare which aren't financed through the federal budgets. For Germany for instance it is run on mandatory pension and health insurance, cross financed in part from the federal budget.
Money is increasingly needed by the federal treasury, which spends every third ruble on the war
Going off the linked explainer in wikipedia https://en.wikipedia.org/wiki/Government_expenditure
Public expenditures represented 46.7 percent of total GDP of the European Union in 2018. Countries with the highest percentage of public expenditure were France and Finland with 56 and 53 percent, respectively. The lowest percentage had Ireland with only 25 percent of its GDP. Among the countries of the European Union, the most important function in public expenditure is social protection. Almost 20 percent of GDP of European Union went to social protection in 2018. The highest ratio had Finland and France, both around 24 percent of their GDPs. The country with least social protection expenditure as percent of its GDP was Ireland with 9 percent. The second largest function in public expenditure is expenditure on health. The general government expenditure on health in European Union was over 7 percent of GDP in 2018. The country with highest share of health expenditure in 2018 Denmark with 8.4 percent. The least percentage had Cyprus with 2.7 percent. General public services had 6 percent of total GDP of European Union in 2018, Education around 4.6 percent and all other categories had less than 4.5 percent of the GDP.
Germanys federal budget is 476 billion euro in 2024 Germanys 2024 GDP is at 4.3 trillion Euro.
5% of 4.3 trillion is 215 billion. 215 billion is 45% of 476 billion, so even if the budget is increased significantly, these 5% GDP would correspond to a third or even more of the federal budget and be similar to Russias war economy spending.
I think the difference is that, while both Russia and Germany are federations on paper, Germany is much less centralized.
- to the best of my knowledge, 3.5% would be military spending, and 1.5% could be other "defence" spending (as others have already written).
Still, not fun with the 3.5%/5%. Overshooting, typical for "weapons as war repellent" strategy (and unfortunately, expanded military often does not want to stay idle...)