Реферат: Russian Federation Country Study. A Public Finance Perspective
Price stability began to go by the wayside
in the fall of 1988 with an estimated inflation rate of 7 percent which
mushroomed to 10 percent in 1990. As Table A3 and A4 indicate, the state
increased both the level of wages and subsidies in the other which constituted
the component parts of the Soviet safety net. Real wages, however did not
compensate for inflation. The decline in social welfare from a monetary angle
was compounded by quality decline in social consumption areas. Although the
state increase subsides to social consumption areas, the collapse of the
Council on Mutual Economic Assistance (CMEA) which provided much of the USSR's
medicine and medical supplies and a growing environmental movement which forced
the closure of many chemical plant that supplied the limited domestic market.
Gorbachev's attempts at reforms destroyed not only the social contract which
existed between the state and its citizens but the USSR as well. The late
Soviet period thus provides the starting point for examining poverty and the
Russian Federations response to it in the form of the social safety net.
The Soviet social welfare system was
effective in that absolute poverty, i. e. wide spread hunger or inadequate
diet, was avoided in the latter years of the Soviet period since the state
could supply the basic needs of the population through its control of USSR's
resources and society as a whole. Research into question of poverty and
therefore poverty alleviation policy (specifically the question of income
inequality and distribution) was hindered by the imposition of political rather
than economic explanations. In 1965, the Soviet Labor Research Institute
adopted a social minimum income norm which was derived from the estimated costs
of human consumption. Goskomstat revised the income level based on the prices
reported by state-owned stores. The price consumers were faced with, however,
due to their shopping habits, the existence of a black market," and inflationary
pressures dramatically reduced their purchasing power. The Russian Federation
revised the poverty line in 1992 to encompass the age and gender of individual
households. The six categories are: children under six years of age children
between the ages of 6 and 17, men between the ages of 18 and 59, women between
the ages of 18 and 54, men age 60 and above, and women age 55 and older
Closer to the U.S poverty line definition,
the Russian poverty level is established by first collecting low-cost cost food
baskets for each demographic group... [and] after pricing each market food
basket at national prices, age, and gender-specific multipliers yield
individual poverty line for each demographic group. The definition of poverty
is critically important to social welfare of Russia because, in theory, it sets
pension, minimum wage level, and welfare payments. The USSR's dissolution has
altered the scope, source and method of financing of social welfare programs.
The Soviet state provided a broad range of social services, through state owned
enterprise. From a public finance perspective, the transition to a more market
oriented system has meant the diversification of social spending responsibility
through the creation of off-budgetary funds (OBF) and passing down the bulk of
public social spending mandates to sub-national governments. The following are
the major OBFs: Pension Fund, Social Insurance Fund, Employment Fund, and the
Fund for Social Support.
Created in 1991, the Pension Fund was
designed to take pressure of federal budget and is authorized to collect a
mandatory payment from employers in the form of a mandatory 28 percent
contribution while from agricultural enterprises the mandatory contribution is
20. 6 percent and 5 percent of the total income of self-employed individuals.
Employees make a 1 percent contribution to the Fund. Labor pensions, financed
from these contribution, and social pension which are financed from the federal
budget are administered by an independent government agency. The former
constitute the majority (80 percent) of Russian pensioners and thus the level
of labor pensions affect the lives 19. 5 percent of the Russian population. To
be eligible for labor pensions, men must have made 25 years worth of
contributions while women must have made 20 years of contribution. Eligibility
for labor pensions can be lower depending on occupation--hazardous occupations
such as coal mining and military service are two examples. Social pensions are
for individual with less than 5 years of work experience and is equal
two-thirds of the minimum old-age pension or in the case of disability the
amount varies but does not exceed the minimum labor pension.
Payroll contributions are the also the main
source of funding for the Social Insurance Fund (SIF) and the Employment Fund.
Created in August 1992, the SIF is funded by a 5.4 percent payroll deduction
from every worker. The SIF is intended to fund child care, maternal care
benefits, and sick care. Generally, 74 percent of revenue collected from the SIF
contributions remains with the enterprise while the remainder is sent to the
center to finance federal responsibilities. Workers who have accrued eight or
more years of experience receive their entire salary as do Chernobyl victims,
parents with three or more children, and war victims. Workers with less that
five years experience receive 60 percent of their salaries while those with
between five and eight years experience receive 80 percent of their salaries.
It is accepted practice that benefits are paid until the worker recovers or is
granted a disability pension.
Mothers receive support through a maternity
grant which equals five times the amount of the present minimum wage.
Additionally, working mothers receive a maternity allowance, over the span of
126 days, which is equivalent to her entire salary. When this time has elapsed,
the mother can receive a payments that equals the minimum wage for up to a year
and half.
The expenditure responsibility for family
benefits, which generally are divided into the following broad categories:
payment made to all families with children without regard to income or
prerequisites, cash transfers to disadvantaged families, and payments made to
working mothers, is unequally shared among all three levels of government.
Although the national level contributes, it mandates the levels of benefits
while often leaving it to the sub-national governments to finance the increase.
Unemployment in the region in a relatively
new phenomena due to the general nature of the Soviet system. The Employment
Fund was created in 1992 to pay unemployment benefits to those affected by the
transition to a market economy. Contribution to the fund comes from a mandatory
two percent payroll deduction and budget transfers. Revenue collected from the
payroll tax is shared between the raion and oblast governments on a 45 percent
to 55 percent ratio. The former then remits 10 percent to the center for
federal responsibilities. Benefits, from Western perspective, are considered
generous. Individuals just entering the work force receive the minimum wage.
Workers who have been laid of receive in the first three months receive a cash
benefit equal to 75 percent of their previous salary. The benefits level drops
to 60 percent for the following six months and 45 percent for the remainder of
the year.
The Fund for Social Support ( FFS) is a
limited national source for sub-national funding of social programs. In 1992,
the FFS accounted for only .01 percent of GDP. The stated purpose of this fund
is to aid rayons that have been particularly hard hit in the transition from a
command economy. The FFS began operations in 1992 with revenue from seized
Party assets and tax from re-appraised inventories. It is also supposed to
receive revenue form the privatization process (although it did not receive the
ten percent assigned in 1992) and "receipts from the revaluation of
commodities in state stores and ruble receipts from sale of food aid."
Although inflation increases revenue to the
Russian government, it naturally impoverishes the population when adjustments
are not made (or insufficient to deal adequately with inflation) to monetary
benefits such as the minimum wage and pensions which provides the basis for the
social safety net. Inflation was one of the primary causes of poverty in
Russia. As chart A5 shows, social subsidies and transfers have also been
ineffective because they do not reach the truly needy. The primary reason for
this economic waste is the lack of means based testing.
The problem of hyper-inflation which had
plagued Russia earlier in the transition period has been replaced" by the
dramatic reduction in real wages and severe dilemma of arrears. By December
1995, real wages declined by 13 percent and real consumption declined by 5.3
percent. Real wage decline, and unexpectedly low levels of unemployment, can be
attributed to evasion of excess wage tax and inside the gate employment"
by which enterprise managers hoard labor by paying minimum wage and
compensation workers in non-taxable manners such as payment in kind, low
interest long-term loans that have questionable repayment terms. It should be
noted that the Pension Fund is becoming more experienced in detecting methods
of tax avoidance and recent action has been taken to close loopholes
Reduced inflation has given way to arrears
as one of the primary causes of poverty in the Russian Federation and has
primarily been the result of international pressure to reduce the budget
deficit by ending emission based methods of covering the deficit" and tax
avoidance and evasion. According to ITAR-TASS, pensioner were owed nearly 3
billion dollars in October 1996. Revealing the revenue gap, 22 regions were
able to make pension payments while the remaining 69 needed transfers from the
federal fund. Wage arrears for both private and public sector were estimated at
43 trillion rubles--9 billion of which was the state's responsibility.
An area of concern which was not addressed
in 1992 and continues to be a problem today is a rapidly deteriorating income
distribution between the regions of the Russian Federation. The disparities
between the rich and poor regions could possibly be the worst amongst all the
federations.
CONCLUSION AND SUGGESTION
One
of the greatest obstacles to successful Russian market economic development is
the absence of a modern and effective tax system and lack of reliable data.
Foreign capital always seeks predictability, especially in terms of projecting
tax liabilities. Lack of a stable tax regime is the number one reason why
Russia's direct foreign investment dollar level is so low compared with other
emerging markets. A frequent and common concern expressed by foreign companies
is the fear (whether real or perceived) of an unstable, inequitable,
unreliable, and unpredictable tax system in Russia. As a result, capital that
could potentially be invested in Russia is instead invested in other countries
that are perceived as enjoying more stable tax systems. For Russia, it is time
to introduce tax breaks or other incentives by the end of the year for
companies using international accounting methods as part of a new business
reform plan. For example, companies which would follow these (international
accounting) standards will have their profit tax lowered by, say, five
percent... or maybe they will receive other privileges. Most Russian companies
use domestic accounting practices developed to calculate tax levels. Western
accountants say Russian accounting has limited use for business planning and
investment. Below, we have stated some suggestion and concerns regarding public
finance in transitional economies:
Before making any changes in the tax system
the officials have to think very carefully to avoid unplanned changes. For
instance, the law on the VAT has been changed 13 times since it was enacted.
Proper tax reform would also solve another of Russia's problems--its chronic
budget deficit. The country's inadequate system of tax revenue collection has
been unable to keep pace with the rise in government expenditure, leading to a
budget deficit of 6.3 per cent of GDP in the first half of this year. According
to Mr. Stuart Brown, eastern Europe economist at Paribas Capital Markets, while
fiscal policy has been lax in Russia, monetary policy has had to bear the
burden of reducing inflation. The result has been high real interest rates. No
wonder then that several leading companies are looking abroad for capital.
Reducing the budget deficit, to reduce "crowding out" at home and
allow fiscal policy to take some of the burden in controlling inflation, must
therefore be a priority for the Russian government. The problem is that tax
evasion and a culture of non-payment in Russian industry, will hamper efforts
to improve revenue collection.
Regulate the movement of budget money by
reorganize the Russian treasury and concentrate all budgetary financial flows
within it.
A good approach to battling non-compliance
would be the implementation of a unified computer information system to control
revenues and expenditures of the federal budget and state extra-budgetary
funds, which should contain taxpayers registration system and bring together
information on tax and customs duties payments, banking transactions and cash
disbursements, as well as data on tracing and utilization of the federal budget
resources. But it is still difficult to implement. First, Russia does not have
high qualified specialists in database and management information systems
(MIS). Second, it will require buying expensive mainframe computers what is
critical under collected (60 percent - percent) revenue. It is also important
to decide what kind of tax information is going to be the first to be put in
the database. The State Tax Service of the Russian Federation recently began
this process by requiring all taxpayers to indicate a personal taxpayer
identification number (PTIN) on payments and settlement documents for taxes and
other levies beginning on August 1, 1995. The rule as of January 1, 1996,
states that a PTIN should be included on all payment and settlement documents.
Also Russia's State Taxation Service is redoubling its efforts to stop
commercial banks from hiding income from tax authorities. The taxation service
recently found that credit institutions failed to transfer 3 trillion rubles to
the state on time, and that they have used legal means to hide their income.
With the centralized computer tax information system, it would be easier to
observe taxpayers and prevent tax evasion.
- Reduce the cost of servicing the state
debt.
- Stop the emission of money.
- Improve control over monopolies.
- Reorganize the banking system. Set up a
federal deposit of insurance bond.
- Reform ministry of finance and economy.
- Diversification of the tax base.
Some services should be financed by taxes
levied on local beneficiaries. "Local taxes" are those over which
local authorities have some control. Which taxes to assign? The question is not
easy for Russia. In many market economies, the central government controls
those taxes considered to be most redistributive, such as personal income
taxes, and the cyclical corporate income tax, leaving more stable revenue
sources levied on a consumption base or property to the local level. For
example, some federal systems (the U.S., Switzerland, Canada) allow subnational
corporate taxes, it would be better for the federal government to set the
corporate income tax. For the transition economies, considerations of both
administrative complexity and allocative efficiency suggest that subnationally
levied corporate taxes should be avoided at the present time. Permitting the
many small subnational governments in the transition economies to set corporate
tax rates (or adjust the tax base) will allow substantial tax competition and
differentiation in enterprise taxation, influencing enterprise location
decisions in perhaps undesirable directions.
.The development of a more efficient and
effective social safety net in perhaps the most immediate and difficult task to
accomplish in the Russian Federation. Aside from cultural reasons outlined
earlier, economic growth cannot occur without social stability which will not
happen until Russia can design an effective system of coverage. Some possible
ways to improve this critical area are: diversify the tax base for social
programs, redesign the system of federal-sub-national relation which has made
the latter bear an unjust amount of the burden--unfair because of regional
differences and compounded by Soviet planning--, and make stronger attempts to
reduce arrears which is a difficult task due to the temptation to return to
emission-based methods of covering expenditure requirements.
APPENDIX
Table A1 Selected Economic Indicators, Average Annual Rate of Growth
|
|
1961-70 |
1971-75 |
1976-80 |
1981-85 |
1986-90 |
1. Net material product (NMP), Soviet
official* |
6.4 |
5.1 |
3.9 |
3.1 |
4.1 |
2. Gross national product (GNP), CIA
estimates* |
5.1 |
3.7 |
2.1 |
1.9 |
C |
3. Gross fixed capital investment, Soviet
official* |
6.9 |
6.8 |
3.5 |
3.5 |
4.9 |
4. Industrial output, Soviet official |
8.5 |
7.4 |
4.4 |
3.7 |
4.6
|
5. Industrial output, CIA estimates b. |
6.6 |
5.9 |
2.4 |
2.0 |
C |
6. Agricultural output, Soviet official
c. |
C |
2.5 |
1.8 |
1.0 |
2.7 |
7. Agricultural output, CIA estimates
b.,c. |
C |
1.4 |
0.4 |
(-)0.6 |
C |
8. Real income per capita, Soviet
official |
6.5 |
4.3 |
3.4 |
2.1 |
2.7 |
9. Consumption per capita, CIA estimates
b. |
3.8 |
2.9 |
2.0 |
1.9 |
C |
SOURCES: Soviet official data and plan goals, TSSU (1986) and earlier volumes
in the same series; Pravda, March 9, 1986; June 19, 1986; June 20, 1986; John
Pitzer (1982), CIA (1985, pp. 64ff; 1989, pp. 45, 59ff); Gertrude E.
Schroeder and M. Elizabeth Denton (1982). For consumption, 1981-1985, and
agricultural output, 1976-85, unclassified CIA data supplied to author.
Authors' Source: Abrham Bergson Soviet Economic Reform Under Gorbachev"
in From Socialism to Market Economy .ed William Kern 1992 p. 37
a. Utilized for consumption and
accumulation.
b. Output valued in 1970 prices for growth rates for 1961-75 and in 1982
prices for growth rates for 1976-85.
c. Not available.
d. CIA estimates essentially accord with Soviet official data.
e. Yearly growth rate of average for five-year period over average for
previous five-year period.
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