Реферат: Russian Federation Country Study. A Public Finance Perspective
Реферат: Russian Federation Country Study. A Public Finance Perspective
RUSSIAN
FEDERATION COUNTRY STUDY
A PUBLIC
FINANCE PERSPECTIVE
Ryan
Grace rgrace@indiana.edu
Dmitri Maslitchenko dmitri@mailroom.com
David Lamp dlamp@indinana.edu
Political Background
The separation of powers which existed
under the Soviet constitution was essentially a myth. A Russian accurately
characterized the relationships that existed between party, state and society
as, ...The state absorbed the society, the Party absorbed the state, and the
Party appartchiks, the nomenclature under the totalitarian leadership of the
Secretary-General absorbed the Party." Both legislative and judicial
branches served as rubber stamps" to the Presidium of the Supreme Soviet
which unlike the Supreme Soviet itself was constantly in session. The
development of political reform in the late 1980s weakened the party's control
over the reigns of power. The devolution of power from the Presidium occurred
through the creation of the office of the President which received the
executive powers while the legislative powers were assigned to Congress of
Peoples Deputies. The judicial branch also achieved higher visibility during
the late Soviet period through the creation of the Committee on Constitutional
Supervision. The Soviet Union's collapse in 1992 introduced radical changes
into all aspects of Russian society. Russia has little experience with
democracy in any form. Without a strong democratic tradition, it should not be
unexpected that instability would develop in all aspects of Russian life. The
role of governmental finance in post-Soviet society is no exception. Competing
explanations exist for Russia's travails but a shared trait of many them is the
distribution of power at the federal level and the relationship between the
federal and sub-national levels of government.
Political problems did not take long to
develop in the Russian Federation after the USSR's dissolution. At the federal
level, the creation of the present constitution is one cause of the instability
which plagues Russia today. After winning a national referendum on August 15,
1993 in which the electorate was asked to endorse the Yeltsin's reform policy,
he convened a constitutional assembly to ratify his version of the new
constitution. Three drafts were in contention to replace the constitution under
which the Soviet Union was nominally ruled. Other than Yeltsin's constitution
which became the one implemented, the two other variants were the communist
draft which advocated a strong Presidium of the Supreme Soviet with a chairman
who had similar powers to the position of General Secretary during the Soviet
period and the Rumyanstev draft which contained plans to restrict executive
power and grant the legislative body wide powers. Yeltsin's draft advocated the
exact opposite of the aforementioned plans with wide powers to the executive
and minimal power delegated to the legislative. After the Duma rejected
Yeltsin's order to dissolve, he ordered military troops to forcefully evacuate
the building--which they did by shelling it. Briefly, the president is the
protector of the constitution, human rights, and civil liberty. In order to
protect the constitution and the aforementioned rights, the constitution grants
the president wide injunctive and declarative powers. The former powers consist
of the president's ability to use "conciliation procedures to resolve disputes
between the federal government and the governments of the constituent subjects
and disputes between the various subjects of the federation." A three
stage procedure exists for the adjudication of disputes but his ability to
suspend legislation after it is submitted to the appropriate court" which
he deems to be in violation of the constitution is considered by many as
inappropriate for a fledgling democracy. The President also has the power to
issue decrees and orders which are superior to the laws of the government as
long as the decree or order does not violate the constitution. Further, the
president has the ability to appoint important member of his government without
consent for the Duma and has sole power to appoint and remove the command
structure of the Armed Forces. In regards to the legislature, the president has
the ability to dissolve the Duma if it passes two no-confidence vote in the
Russian government within three months of each other and if it rejects three
presidential nominee for Chairman of the Russian government. Although there are
limitations of the president's ability to dissolve the Duma, it remains a
potential weapon against a contentious parliament that affects every aspect of
public finance.
The power of the legislative and judicial
branch are limited in relation to the executive. Russia's judicial system
consists of a several court systems that have different spheres of
federal/national jurisdiction." The most visible court is the
Constitutional Court which has the right to review the constitutionally of all
federal laws, presidential orders and degrees, legislation of government, and
unratified treaties. Challenges to the aforementioned areas must be brought by
individuals with standing. Although the Constitutional Court's power seems vast,
the president's expansive powers and lack of civil relations between the
different branches makes the Court's utilization of this power suspect. Federal
law and federal constitution laws are the two types of laws which exist in the
Russian Federation. The latter is considered superior to federal laws. The
procedure for enactment differ in each case. Once a bill is passed it must
presented to the president within five days of the passage by the parliament.
The president then has fourteen days to reject the law. In order to veto the
federal law, a two-thirds majority must be gained in both parts of the
legislative assembly. In the case of federal constitutional law, three quarters
of the Federation Council and two thirds of the Duma must approve it for enactment.
The constitution does not describe any right for the president to veto federal
constitutional laws. According to Article 106 of the Russian Constitution, laws
in regard to the following area must be voted upon by the Federation Council:
The federal budget, federal taxes and levies, foreign currencies, custom
regulation, and currency issuance.
Budgeting
Recently,
the Duma rejected the government's first draft of the budget. Deputies were
divided over the size of the projected federal budget deficit, which was set at
95.4 trillion rubles or 3.5 percent of GNP. When the budget is rejected by the
Duma, the government has 20 days to revise and re-submit the budget. If
differences exist between the government's proposed budget and the Duma's, an
option exists to create a committee to reconcile their disagreements. The Duma
rejected the government's proposed 1997 budget in October 1996 and did not opt
initially for such a commission. If no budget agreement is reached, parliament
would be forced to pass monthly or quarterly budgets which would cause
confusion throughout the economy. Since the initial rejection however, a
reconciliation commission (in which both houses of parliament and the
government are represented), has been working on a new version. The reconciliation
commission is due to have a final meeting on Wednesday, with the Duma giving
the budget a new first reading on November 20 or 21. There is no legal
framework to cover the failure to pass the budget, but parliament has faced the
problem every year of Russia's independence except 1996 and has in the past
approved temporary budgets.
The work of the reconciliation commission
is being drawn out because neither the communist majority in parliament nor the
government wants to take responsibility for making a decision on the budget.
Russia is trying to keep to a small deficit in 1997 under pressure from the
International Monetary Fund, but the Duma is eager to increase budget spending
to a starved economy. Reform minded deputies want a lower budget deficit to
achieve lower credit rates--which they say are vital for economic growth but
which are kept high through heavy government borrowing. The dilemma is that the
communists in the parliament want to increase spending and as a majority they
can block implementation of any budget bill.
Taxation
Russia's
tax system is an exercise in frustration for both Russians and foreigners. The
problem arises because it seems that many taxes spring out of the blue and
carry heavy retroactive penalties" which are often three times the tax
amount due. Russian tax reform is difficult now because the government
desperately needs money and has little room to maneuver since revenues are
static and low. The budget take, both federal and regional, came in at just
27.3 percent of GDP, compared to 50 percent in the Czech Republic and 47.7% in
Poland Russia's budget deficit has been narrowed in recent years, but this only
been achieved by cutting back on expenditures in real terms, almost 50 percent
from 1993 to 1995.
Like the United States, Russia has a
three-tiered system of taxation. Federal taxes are enforced by Parliament,
regional taxes enforced by the regional councils, and local taxes enforced by
the local authorities. Under the existing system, very little coordination can
be found between the three levels of government which causes serious tax policy
problems. In a 1993 decree, regional and local authorities were given the power
to decide on types and sizes of taxes for their jurisdictions. The hope was
that authorities at each level, being responsible to its citizens, would act
within reasonable limits. Local authorities, seeing a way to increase revenue,
devised more complicated and exotic taxes. There are 150 locally imposed taxes
within the Federation . They were competing who would invent the more
interesting taxes at their respective levels--for example a tax on grazing
cattle.
Tax Code
The Russian tax system is very complicated. The first two sections of the new
code have 416 articles which are contained in more that 100 pages--and this is
just an the overview of general principles. In an effort to improve tax law, a
new draft of tax code was presented to the Russian parliament in February 1996.
Apart from laws, the tax regime is regulated by many other documents. The list
of these tax documents includes 900 items. It is understandable that the
taxpayer can be confused by so many documents. Even a good taxpayer can make
mistakes. The code is not expected to be enacted this year but it is a good
step toward improving the clarity of the tax system. The current system,
plagued by an excessive tax burden and rampant tax evasion, has seriously
impeded tax collection efforts. The proposed draft code seeks to implement a
number of the reforms prevalent in Western economies during the 1980s,
including a broadening of the tax base, lowering of tax rates, and the
reduction of incentives, exemptions, and deductions.
A new mechanism for tax refunds in the case
of overpayment is also provided in the code. If a taxpayer paid too much tax at
his own initiative, the taxpayer may request the overpayment amount be credited
towards his next payment or be refunded within a specified time limit. If the
time limit was exceeded, the amount would be refunded with interest at a
interest rate tied to the prime rate of the Central Bank. In January 1996, new
rules came into effect concerning the refund of VAT if the taxpayer is involved
in exports operations. It was a major problem since VAT refunds were the
responsibility of local budgets. The 1996 budget, which was submitted in
mid-August, provided such VAT refunds from special funds of the federal budget.
Overview of Major Taxes
Income tax
Russia's individuals income tax has several
bands which range from 30 to 60 percent. The 60 percent rate is essentially the
only rate in effect for Westerners. In 1993, the tax law was changed. Earlier,
individuals could only pay taxes in rubles. Now, taxes on income earned in hard
currency may be paid in rubles or in hard currency. Proposals to increase the
Russian personal income tax rates were rejected by Russia's upper house, so the
1995 personal income tax rates remain in effect as of January 1, 1996 (see
appendix). Three tax brackets now exist in the Russian Federation: 12 percent
on income up to Rubles. 10 million, 20 percent up to Rubles. 50 million, and 30
percent over Rubles. 50 million. The current exchange rate is one dollar to
approximately 4,700 rubles. While many individuals may complain that the higher
income tax rates will cripple them, Russia would still have the lowest personal
income tax rate in Europe at 35 percent.
Excise tax
The excise tax in Russia explicitly covers
imported luxury goods, including tobacco products, beer wine and spirits, cars
and light truck, tires, jewelry, gemstones, rugs, crystal, fur, and leather
products. The rate of excise tax ranges from 10 percent for crystal to 90
percent for grain alcohol personal. A new principle was applied, in accordance
with a recent decree, to the calculations of excise taxes on alcohol and
tobacco imports. In contrast to the previous practice where excise taxes were
calculated in proportion to the customs value of the imported goods, under the
new procedure, the taxes (on August 1, 1996) will be imposed in ECU per one
unit of commodity item. In some ways, excise taxes and single-stage retail
taxes would seem to be prime candidates for regional taxation in the Russia
just as they are in market economies, especially if the taxing locality is
large enough to avoid revenue loss from consumers crossing the border to
regions with lower tax rates Such taxes thus seem more suitable for larger
intermediate governments than for small local governments.
Profit tax
The profit tax calls for a 32 percent tax
on all profits, with an exception for profits generated by retailers. Profits
by retailers are taxed at a 45 percent rate. The tax discriminates against
Russian workers because the tax is not applied to the wages of foreign workers.
The profit tax keeps intact the profit reinvestment concept of prior Soviet tax
legislation. Essentially, no tax is imposed on profits reinvested in the
business venture. Also, the government has not changed the 15 percent
withholding rate for interest, dividends, and other passive income. A 20
percent withholding rate applies to royalties on copyrights and licenses.
VAT
A VAT of 28 percent passed into a law on
December 6, 1991 and became effective on January 1, 1992. The VAT was not
initially imposed on imports or exports. However, the government changed the
policy very soon afterwards. For instance Russian neighbor, Ukraine will be
happy to realize that Russia imposed a VAT on imported goods originating from
Ukraine (Decree No 1216 of August 18, 1996). The reason for the decree is to
preserve stability of the Russian commodity market. The decree also takes into
account that Ukraine is not a part to an agreement signed by the member states
of the Commonwealth of Independent states on the coordination of tax policy.
The general VAT rate as of January 12, 1996, remains at 20 percent. A rate of
10 percent applies to certain food items and children's goods. Payment of the
profits tax and VAT of state owned enterprises is centralized at the level of
their ministries administrative departments (Decision No 629 of May 22, 1996).
Corporate income tax
The corporate income tax has three tax
rates and the application is based on the type of income earned. Manufacturing
income is taxed at 18 percent, service income at 25 percent, and income earned
by retailers at 45 percent. One of the most interesting things is that the
revenue is not intended to go to the central government. Moreover, the law is
written that regional authorities can tax corporate profits up to 18 percent,
25 percent, and 45 percent.
Sales tax
The sales tax was first introduced on
December 29, 1990 by USSR Cabinet of Ministers. It was decided to approve a
list of goods and services whose sale on USSR territory will not incur the 5
percent sales tax. The local and regional authorities may make additions to
list of goods in everyday demand and services to the population which are
exempt from the sales tax (see the appendix). population.
Further Drawbacks of the Russian Tax System
Attorneys and tax specialists in Russia say
the greatest problem facing enterprises is the lack of a satisfactory tax code.
It is necessary that tax policy should be circumscribed and that more power
should be given to the legislature. The nature of the tax structure allows some
people to be heroes by breaking the rules. For example, a pharmaceutical
company chief who had his security guard expel tax inspectors from his head
quarters and vowed to shoot them if they returned, was elected to a seat in
Parliament instead of going to jail. The penalties for non-payment of taxes is
a defiency of the tax system that drives people from the tax system because
they are so afraid of making a mistake that they prefer not to pay. For
example, a standard 100 percent fine exists for understating income. The
interest rate on late payments alone amounts to 0.7 percent a day, or 255
percent per annum, a penalty that can dwarf the actual liability. The penalty
amount is presently reduced and is tied to the refinancing rate of the Bank of
Russia. The penalty for each day of delinquent payments would equal 1/300 of
the prime rate of the Central Russian Bank.
Russia also does not have a specialized tax
court. To seek justice in tax issues, taxpayers have to find a people's court
which is willing to accept the case. The courts do not have expertise in the
area of tax law which is why most of the courts are reluctant to accept tax
cases. The lack of legal recourse leads to corruption within the tax collection
system. Russia does not have a law like the Freedom of Information Act (FOIA)
or the Privacy Act which hinders the accountability of the tax service.
Aside from ample monetary reasons to evade
and avoid taxes, taxes (in the Western sense) did not exist in Russia during
the Soviet period and therefore the idea of a Western style taxation is
unpalatable to many Russians. Taxes began to appear in the USSR only in 1991
which means that the current population has only had to deal with the issue of
taxation over a short period of time. The result of this historical experience
is that only between 60 and 75 percent of projected tax revenues have been
collected this year.
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