12 march 2013

Meeting on raising additional revenues for the federal budget

Dmitry Medvedev’s opening remarks:

Today, the Government is doing its favourite job. It is dividing allocations which have not yet been collected. On the one hand, this is a pleasant business. But, on the other hand, it is rather troublesome. We realise that all the possibilities we have today are linked to the existing budget regulations. I'm not reminding you about this, I'm simply stating a fact. So expenditures can only be increased in line with existing budget standards, that is, with the help of additional non-oil and gas revenues, although we can and must expand the taxation base by using tax and non-tax sources. Today, we must assess the scale of surplus revenues. We have already made the first estimates about how to increase the respective types of revenues.

I would like to make several introductory remarks. Of course, we must improve tax control, as well as customs control, so the heads of the Federal Tax Service and the Federal Customs Service are here today. We have to improve the efficiency of this control while at the same time reduce the administrative burden on the taxpayer. How can this be done? This is a difficult task, but we can accomplish it. We must demand that all regulations are strictly complied with.

Naturally, we must set out administrative penalties for violations of cash handling regulations and cash payment regulations. Of course, we must assess the responsibility of banks for concealing information about dubious financial transactions that involve the accounts of their clients. We have repeatedly discussed this issue. On the whole, we have to keep moving in the direction where we are currently heading.

Secondly, I would like to mention effective wage legalisation measures. Although much has been achieved in this area in recent years, and although the taxation system mostly compels taxpayers to receive legal wages, problems nevertheless exist, and we need to address them. In the long run, this is both a legal and psychological issue. People have to realise that illegal wages eventually reduce the budget potential, as well as their future pensions.

Thirdly, we need a modern policy on the management of state property and privatisation revenues. This issue has also been mentioned more than once. We have also discussed the implementation of the privatisation programme and various problems. Nevertheless, I believe that the Ministry of Finance has every right to insist that all our planned revenues, including those from the privatisation of state property, must be entered into the budget account. And this is correct, we are counting on this money.

On the one hand, we must objectively assess the effectiveness of investment programmes of companies with state capital before transferring budget allocations as contributions to the statutory capital of state companies. And we must find out about the volume of budget revenues and other positive budget policy aspects after the implementation of these investment programmes. Of course, not everything is measured by budget standards, but we need to think about this.

And, finally, I would like to repeat something which is very important. Surplus budget revenues are without doubt a key factor in implementing social programmes in education, healthcare and social security and in improving the quality of life of a huge number of our citizens.

Let’s get down to work.

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Finance Minister Anton Siluanov answers journalists’ questions after the meeting on mobilising additional federal funds

Anton Siluanov: A meeting on forming the budget’s revenue base is one of the meetings on budget policy that the Prime Minister will hold both for the current year and the next three years. A meeting on budget spending will also take place this week.

Budget revenues are one of the key issues for us as we adopt the rules on spending limits that we have agreed upon and that are immutable. Therefore, we can increase spending on priority programmes and projects only by raising more budget revenue. Today we discussed proposals on collecting more revenues and increasing budget resources and on privatisation. As for increasing budget revenues, today we discussed the Government’s legislative initiatives that the State Duma adopted today – in the first reading, notably – a draft law on countering money laundering, the so-called anti-money laundering law. We hope that it will be very helpful. True, it will come into force next year. It provides for very important measures to increase competition in the economy. It will not change anything for legitimate taxpayers because it targets tax evaders.

We also spoke about the need to limit cash settlements. We have spoken about this with you. The draft plan that the Government has prepared and reported to the Prime Minister includes many proposals on enhancing cooperation between tax and customs services with law-enforcement agencies, primarily the Interior Ministry and the Investigative Committee. Better coordination of their work (and this is what they lack) will make it possible to raise more budget revenue at all levels.

As for privatisation, we reviewed the proposals on implementing the plans to raise revenues from it this year. Let me recall that we have planned to raise 427 billion roubles from privatisation for closing the budget deficit. At the meeting we discussed how to acquire this sum.

Question: And what have you decided on privatisation?  The Ministry of Economic Development has proposed increasing revenues from privatisation to one trillion roubles. What about proposals on the sale of Rosneft, Rostelecom and the United Grain Company? Have these proposals been adopted?

Anton Siluanov: We have reviewed proposals of the Ministry of Economic Development on companies. A big part of this trillion is supposed to come from the additional issue of shares of these companies that will not produce additional revenues for the budget. These companies will simply increase their capital. Therefore, we have decided to sell as much property as we can. As we said, this measure will not only fill holes in the budget, it is also a structural measure that will improve competition in the national economy. Therefore, we decided to include as many proposals as possible from the Ministry of Economic Development regarding the implementation of privatisation plans.

Question: Will we have a strict policy for all revenue to be channelled to the budget, and not to the company? For example, VTB has not planned recapitalisation. Will we maintain the rule according to which we give something to companies and we take something for the budget? Or will we have a strict rule whereby the budget takes everything?

Anton Siluanov: Colleagues, situations that are similar to VTB have to do with the issuing of additional shares. Therefore, VTB issues additional shares, raises funds to conduct its operation, and this does not involve an exemption of any funds to the budget.

Question: Does it concern old funds? As they planned – 427…

Anton Siluanov: Yes. The Ministry of Finance is concerned with filling this sum; we raised our concern at the meeting, and today they discussed the proposals to sell stakes in the company primarily to channel funds raised through privatisation to the budget.

Question: Is it possible that you will not implement this?

Anton Siluanov: No, we hope that we will implement this.

Question: When will the first deals under these plans take place?

Anton Siluanov: We did not discuss timeframe. I think in the second half of the year.

Question: Who will be the first?

Anton Siluanov: Colleagues, there are detailed questions. We did not discuss the timeframe, the companies and priority at the outset of privatisation.

Question: What is your forecast for additional revenues for this year?

Question: How badly are they needed?

Anton Siluanov: Revenue is always needed, colleagues, especially, non-oil and gas revenue. The updated forecast will help us raise additional oil revenue, some 230 billion roubles; and we do not plan to reduce non-oil and gas incomes on the other hand. Primarily on VAT, because of corporate tax deductions for with launching new investment facilities. Since the law provides for VAT tax deductions on such facilities, last year large companies launched major investment projects and more companies will do the same this year, so it will be very difficult to execute the plan on VAT.   

Question: How much will the budget lose?

Anton Siluanov: I’d rather not talk about this now. We, jointly with the Taxation Service, are making efforts to implement the plans – very intense plans on VAT – by the end of the year, therefore the issue of mobilising revenue for current and future measures is very urgent.

Question: Some media outlets have written that the budget falls short of 0.5 trillion roubles. Can you confirm or deny this?  

Anton Siluanov: They probably meant those additional projects created during budget implementation, including additional social projects (perinatal centres and kindergartens), investment projects and infrastructure projects. This is transport infrastructure, including the Moscow transport hub. When you said 500 billion roubles – that is an additional need – it has been proposed that we find additional revenue and resources for this.

Question: Have you found the money?

Question: You said 230 billion roubles are additional revenue from oil and gas?

Anton Siluanov: Oil and gas revenue. But under the budget law, oil and gas revenue must go to Reserve Fund.

Question: Any other revenue?

Question: Have you found an additional 500?

Anton Siluanov: Colleagues, the year is only beginning. We will monitor the situation with implementing revenues, with privatisation, we will look into it. 

Question: And those measures that you proposed to improve tax administration and so on – have you calculated additional revenues from those measures?

Anton Siluanov: Yes, of course. Our proposals can bring some 200–250 billion roubles. But these measures can be implemented in 2014-2015. Thank you.