Finance Ministry promises to share Reserve Fund with governors
Vadim Visloguzov
Yesterday, the Federation Council approved and President Medvedev signed into law a bill implementing Prime Minister Vladimir Putin's tax initiatives - first and foremost, reducing the profit tax by 4%.
The Ministry of Finance has promised the senators, worried by the fact that the emergency tax reduction is being carried out, among other things, at the expense of the prepared regional budgets, to compensate for the regions' losses.
In order to do that and to balance the federal budget, Deputy Prime Minister and Finance Minister Alexei Kudrin is ready to spend up to 1 trillion roubles in 2009 from the Reserve Fund. Just a week ago, the Deputy Prime Minister mentioned half the sum needed for such support.
The Federation Council and the President supported the Duma-set record rate of law-making yesterday when a bill put forward by Mr Putin on making changes to the Tax Code was approved without unnecessary questions by the senators, and was signed into law just a few hours later by President Medvedev.
The point in question is that as of 2009, the profit tax will be reduced from 24% to 20% and as of November 28, 2008, companies can start paying the tax from their actual profit, increasing the bonus depreciation by three times and doubling the property-related tax deduction for home buyers.
The Federation Council as the house of the regions asked Kudrin about the price of the question for regional budgets, but the senators received no answer. So far, the Finance Ministry has set only the maximum revenue reduction sum for the budget system - 556 billion roubles. Of that sum, the losses from the profit tax reduction will amount to 400 billion roubles, the tax on small businesses - 13 billion roubles, from the bonus depreciation increase - 100 billion roubles, and the tax deduction for individuals - 44 billion roubles. Deputy Finance Minister Sergei Shatalov said that after clarifying the macroeconomic forecast in December, the final figure "is likely to be smaller".
Judging by the Finance Ministry figures, the regional budgets may be short 140-150 billion roubles because of the initiatives concerning the taxes on small business and on individuals, and also because of the bonus depreciation increase (the profit tax will become 88% regionally after the tax rate reduction). In reality, the losses will be smaller - at present they are calculated from the hypothetical 100% use of the bonus depreciation by enterprises and from the unlikely possibility that citizens can fully "make use" of the increased tax deduction on housing during the first year of the introduction.
Finance Ministry officials have so far made vague statements as to how the losses will be compensated. Shatalov yesterday spoke of a possible transfer to the regional level of the federal part of the excise duties on alcohol or motor fuel, while Kudrin earlier spoke of possible direct injections from the Reserve Fund. The Budget Code does not allow the Government to share the oil and gas superprofit with the regions, but Kudrin yesterday announced the possibility of making the necessary amendment to legislation.
He said that in 2009, the Government will have to spend more than 1 trillion roubles from the Reserve Fund on tax compensation to the regions and on filling the oil and gas transfer that finances the Government's federal budget spending.
As Kudrin said earlier, it would be necessary to use the reserve on the current spending if oil prices were below $50 a barrel. Today, the Reserve Fund is 3.6 trillion roubles (10% of the projected 2008 GDP at the start of the budget process), and, as Kudrin stressed, "this serious stability cushion" would work for more than three years.
It should be noted that just a week ago, a day before Putin's tax initiatives were announced, Kudrin mentioned different figures. At the Government Hour in the Duma on November 19, he promised that "the cushion" would last for at least seven years and that about 500 billion roubles would be used from the Reserve Fund in the 2009 budget.
