Putin’s promises create problems

Russia needs to find additional money to implement president’s policies.

Russian fiscal policymakers are wrangling over how to fulfil newly re-elected President Vladimir Putin’s spending promises, with one senior Kremlin figure advocating a quick but painful revenue grab and another a more radical overhaul of taxation.

During his campaign Putin promised higher healthcare and infrastructure spending, but did not say how this would be financed, leaving the decision until after his next term commences in May.

With apparently no firm pre-election economic programme to work with, key policymakers disagreed over how to meet his ambitious targets. Postwin, they have yet to settle on a strategy.

Clear is that any plan will have to include changes in taxation, and the debate is now focused on two rival tax proposals.

A plan put forward by Kremlin aide Andrey Belousov would raise taxes across the board, hitting low and middle income earners and small to medium sized businesses the hardest.

A second proposal, put together under Finance Minister Anton Siluanov, focuses on reshaping the tax system, rather than imposing a blanket increase in taxes.

Any tax changes could apply to both citizens and businesses, or to just one, said Sergei Belyakov, head of the Association of Nonstate Pension Funds and a former deputy economy minister.

“It could be a change in taxation basis in some way. In any case the government would need to find additional tax revenue for the budget. Needs are growing faster than the ability to meet them,” he said.

The finance ministry declined to comment and Belousov could not be reached. –