09:08 May. 16, 2016
Potential measures would likely take place after presidential elections in 2018
Russia is exploring a raft of potentially unpopular new tax measures in the coming years, government officials say, as the oil-dependent country runs out of ways to plug holes in the budget, WSJ reports.
Several Russian officials say the government is considering raising income-tax levels and increasing value-added tax but that any changes would only take place after 2018—a presidential election year. Any increase would be a sensitive issue in Russia, where real incomes shrank 9.5% in 2015 and the number of those living below the poverty line was projected to grow in 2016 at its fastest rate since the 1998 crisis, according to the World Bank.
While Russia has run budget deficits in the past, sanctions imposed after Moscow annexed the Black Sea peninsula of Crimea have changed that equation, making it tougher for Russia to borrow on international markets. Russian President Vladimir Putin himself has long favored minimal borrowing abroad and supported the idea of bringing the budget deficit to zero.
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While the government is now spending its oil reserves to shore up the budget, officials privately say that won't be enough to fill the gap between revenues and expenditures within just a few years.
So far, Russia has been able to rely on reserves built up over almost a decade of high oil prices to shore up the budget. But the Reserve Fund dropped to .9 billion this month—its lowest point in four years and down from about billion two years ago.
Russia has another oil fund, called the National Welfare Fund, which currently stands at .9 billion but which is used to fund pensions and long-term infrastructure projects, not the budget.
Other sources of funding have been hard for Moscow to come by. Earlier this year, Russia said it was planning to borrow on the international market, but Western banks shied away from the Eurobond placement because of the sanctions.
Still, officials say they hope they will manage to avoid raising taxes with major spending cuts elsewhere. The government has already pushed through cuts to health care and education. Officials now publicly say they will have to raise the pension age to 65 from its current 55 for women and 60 for men, as well as eliminate pensions for those who are still working. The average life expectancy in Russia is around 65 for men and 77 for women.
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