The first result of the anti-crisis programme is that President Dmitry Medvedev has admitted that the injection of 175 billion roubles of budget money into the stock market last autumn had been a mistake and brought no results. It is good that the country's leader is so honest. But the ease with which mistakes costing hundreds of billions of roubles are made is alarming. One has the impression that under the pretext of combating the crisis officials take decisions easily in the hope that failures would be attributed to the crisis.
For example, one anti-crisis measure being touted to us is an early introduction of the tax on immovable property for natural persons based on the market value of housing and land. In the opinion of Prime Minister Vladimir Putin, conditions for introducing the tax will be created by 2010, although the reform had been in preparation for 10 years. There are real barriers in its way: before introducing the new tax it is necessary to think of a methodology of evaluation, to organise and pay for it, compile a cadastre of all the land, apartments and houses in the country (putting in a single data base not only the physical parameters of every object, but data about the owners). Tax agencies will also have to be prepared for the new procedure. So, however tempting the result of the reform may appear, it is a long, laborious and costly process. According to optimistic pre-crisis assessments preparation for the new tax could be completed not earlier than 2011.
The tax on immovable property, in our opinion, cannot be part of the anti-crisis package because it contradicts its very purpose: the anti-crisis programme included in the 2009 budget earmarks half of the money for various benefits to the population and transfers to the regions, the bulk of whose spending is also on social payments. The aim is to boost consumer demand, which contributes almost half of the GDP. The tax on immovable property, on the contrary, would deprive the population of part of their incomes. The poorest people will be the hardest hit by the rise of the housing tax.
The high tax on immovable property is meant to cool down the housing market. In normal times it would benefit not only the citizens who have dreamt of affordable housing for years, but also the economy. In time of crisis the measures that freeze the housing market have the opposite effect.
The construction industry has the largest multiplier effect on the economy. Therefore experts advise the Government to encourage construction projects. The crisis has slowed down the operation of the housing market: housing mortgages have been stopped and people's incomes continue to fall. A high tax on immovable property will deter some people, especially those who were planning to buy apartments as an investment, from buying. In other words, the "anti-crisis" measure will slow down the economy.
However, Mr Putin has told his subordinates to hurry up because he believes that the new tax will fill municipal budgets, which are shrinking due to the crisis. His hopes are realistic: revenues from the new tax would increase by at least ten times. But whether this measure will help to conquer the crisis, if only at the level of a municipality, is a big question mark.
If the reform is implemented without proper preparation it will boil down to a massive increase of the rates of tax on housing and land while the strategic tasks of the reform will not be achieved (the new tax should prevent bubbles in the housing and land markets, make their prices more affordable and simplify administration). Therefore the gains of the municipalities will be a Pyrrhic victory. Besides, they will be unevenly distributed so that the rich will become richer and the poor poorer. Part of the reason will be that the crippling taxes will prompt massive tax evasion. The further away from Moscow the greater the number of people for whom the new tax would be too much. And the coveted inflow of revenue will not start at once but within several years, Finance Ministry experts warn.
