I don’t think that any normal person still has confidence in our state

2024 Author: Seth Attwood | [email protected]. Last modified: 2023-12-16 15:55

The Russian authorities began to make unpopular decisions in the social sphere. The State Duma recently approved in the first reading a bill to increase the VAT, and, apparently, an increase in the retirement age will follow. The siapress.ru correspondent spoke with the economist and sociologist Vladislav Inozemtsev about how effective the announced reforms are and what they can lead to.

The decision to increase the VAT is presented as a necessary measure for the implementation of the "May decree". At the same time, many directly say that this will lead to higher prices, inflation and a drop in the purchasing power of the population. In the decree itself, one of the goals is to enter the top five leading economies in the world. Isn't there a contradiction in all this between the ultimate goal and the methods of achieving it (and the consequences of these methods)?

You are absolutely correct in pointing out that the May Decree contains a contradiction between the tasks of accelerating economic growth, curbing inflation on the one hand, and raising taxes on the other, which will undoubtedly have consequences. As far as I know, calculations carried out by experts, in particular by the Gaidar Institute, show that a two percent increase in VAT will lead to a slowdown in economic growth by 0.4 - 0.6 percent in the very near future. climate, rising prices and much more. It will not be radically dangerous for the economy, it will not plunge us into a crisis, but we can not expect any positive moments either. So I do not see any opportunities to accelerate economic growth with a VAT increase.

As for the contradiction between the elements of the May decree, this is not surprising, because the document today looks like the works of Lenin for Soviet social science. Just as Ilyich's works were required to be mentioned in any scientific or pseudo-scientific work, so the "May decree" is now becoming a refrain, within the framework of which any things are done, including mutually exclusive ones. Do not look for logic in this.

The media published materials that the main beneficiaries of the increase in VAT will be companies that are on state orders. Do you agree with this?

The beneficiaries from the increase in VAT will be those companies that, in one way or another, receive money from the budget. It can be the same government order, budget investment programs, purchases, and so on. The only consequence of this reform will be an increase in tax revenues to the treasury, respectively, the state will become an even more active buyer of goods and services. With this approach, the beneficiaries will be not only companies working for government orders, but also all civil servants, since they will be able to raise their salaries, since more money comes to the budget.

Who else can benefit from the increase in the VAT rate?

Those companies whose products will be subject to preferential VAT. These are health care organizations with a zero tax rate and enterprises for which the VAT will remain at the level of 10 percent. But even they will have a hard time, because, although their own added value will not be taxed, all equipment, consumables, goods that they buy will still rise in price simply because the VAT increase will take place along the entire production chain.

Is it possible to achieve GDP growth by raising taxes?

Their increase has never spurred the economy, and I do not see the need for this. Such a measure was used when growth was too fast, which is not our case at all, or when there were some unfulfilled tasks before the social security system. I don't see such people in Russia today. In recent years, the budget has even coped with the Pension Fund deficit, while quite a lot of money was spent on defense spending, and the peak of large-scale investment programs has already passed. These are the Olympic Games in Sochi, and the ending World Cup, and the bridge to Crimea. If we talk about some crazy projects - a bridge to Sakhalin, a high-speed train to Chechnya - these are definitely not the ideas for which it is worth raising taxes. Moreover, in my opinion, they will never be implemented. Suffice it to recall the track to St. Petersburg, which has been built since the 1990s, or the railway to Kazan, which was supposed to be completed for the World Cup, and the design has only just begun.

Well, what actions need to be taken in the tax area to achieve economic growth?

In order to accelerate economic growth, we must either cut taxes or radically ease their administration, reduce their number and simplify their collection. There are many such examples, just remember Trump's reforms in the United States. You can see how much their economic growth accelerated due to the fiscal relief that was undertaken after the change of administration. It is better to lower taxes than to increase them, also because any increase leads to the passage of more money through the treasury, instead of being used by entrepreneurs. Not only is money lost in the budget, but we also take funds from profitable businesses that sell their goods in a competitive market, and invest them in those areas where the competitiveness of products is, at least, unknown.

We don't know when the road will be built. We do not know how long the bridge will stand. We do not know how much money will be required to maintain the stadiums. We do not know how justified the costs of our military industry are. I don’t think that budget expenditures increase economic growth in Russia, because they are extremely opaque, they go mainly to monopoly contractors, and in this regard, an increase in the expenditures of individuals on basic necessities will have a much greater effect than the construction of the railroad. roads to nowhere.

What is the long-term effect of raising the retirement age for the Russian economy?

The question of retirement age is complex. Now all experts follow the estimates of the Ministry of Economic Development, which claims that by increasing the workforce, this measure will provide additional economic growth. The figure is about 1.5 percent. It is not very clear when this positive effect will accumulate, but there is some consensus that it will be positive. I am not completely convinced of this for one simple reason. When we throw on the market an additional labor resource that the market does not count on, this will increase the supply of labor, which will bring down its price. In the event of an increase in the number of employees, competition will increase, and wages will decrease, respectively, the disposable income of the population will decrease.

Moreover, there is one more point that is usually not considered, this is the fact that today pensioners receive a fairly large number of benefits: tax on housing, utility services, travel, purchase of medicines and medical care. If we shift the retirement age, then people lose these benefits. They will be forced to pay for what they don’t spend money on today, and not pay for the things they buy today, from groceries to essential goods. This means approximately the same as with VAT - part of the money will be taken from the population, in this case, pensioners, and again transferred to the budget.

Will the pension reform undermine public confidence in the economic institutions of the state?

I would not overestimate him even today. Honestly, I don’t think that any normal person still has confidence in our state, be he a simple citizen or an entrepreneur. Especially an entrepreneur. If only because there have been at least four reforms in the pension sector since 2002. It's the same with taxes. There has been good research by the Higher School of Economics (HSE) and the Kudrin Center (Center for Strategic Research - ed.) On how rapidly the tax system in Russia is changing. Over the past three years, changes have occurred on average every 14 days. Therefore, to say that this government can generally be trusted in something, if you are an entrepreneur, I would not. In my opinion, trust is already close to zero, so reducing it even further is quite problematic.

Will there be a massive boycott in the form of refusal of the official employment of a part of the able-bodied population?

People, of course, will less believe that they will receive a pension, but this does not mean that enterprises will be happy to employ people informally, because there are two subjects - an employer and an employee. An employer may and would be happy to receive more money and not pay pension contributions, but there is some control over him. He reports to the tax office, where he must explain his costs and show the official salaries, if he does not, he is obliged to pay additional income tax. In such a situation, there is no reason to assume that the population will refuse official employment, all the more massively.

A development fund with 3 trillion rubles in accounts is planned as one of the resources for carrying out that "breakthrough". If we rely on the experience of similar structures (the Reserve Fund, the National Welfare Fund), then how effective are such budget funds in modernizing the economy?

First, the National Wealth Fund, like the Reserve Fund, was not a "breakthrough" one. VEB, which financed unprofitable projects invented by the authorities, was considered such a development institution, with a very big stretch of the imagination. Secondly, and I would like to emphasize that the government is not an effective economic entity. said that we will almost double the amount of funding for road construction - in six years we have spent 6 trillion rubles, and over the next six years we will allocate 11 trillion. A wonderful initiative, but the problem is that at the beginning of the 2000s we spent 800 billion rubles a year, and we built three times more roads than today. The number of zeros that appear in the accounts of a fund does not say anything about it efficiency.

What needs to be done in Russia to develop an economy based on innovation?

In order for innovative technologies to develop, economic freedom is needed, which we do not have. There are no elementary legislative grounds for normal innovation activity. There is no analogue of the American Bay-Dole Act, passed in 1980, which allowed teams of scientists who developed something with public funds, then completely write down patents on themselves and make a profit from them. They had an interest in using budget money efficiently, because after inventing something, they patented it, started production, and then paid taxes, which went to the treasury. In this way, the state returned the money spent. In our country, no one will engage in venture capital investments (long-term high-risk investments - editor's note), because if it is not possible to get income right away, then this is embezzlement of state money and the person will be imprisoned. The question is not how much money to invest in innovative projects, but who will invest it and how it will all be organized. The problem is not in fundraising, but in releasing the initiative.

Where are all the reforms announced by the government going?

It seems that all the reforms that the government is now undertaking - with retirement age, VAT, and other steps - is a path in the wrong direction. It is believed that the state operates effectively, therefore, it is necessary to take as much money as possible from the people, from “stupid, thieving entrepreneurs” and give it to the treasury. But I have no reason to think so. I do not see any effective activity on the part of the state either in foreign policy, or in the development of new technologies, or in the profitability of investments. Yes, the state should invest in something that does not bring profit, but if the government does it, then it should have some kind of limit in withdrawing money from those who create profit. But we have big problems with understanding this.

I think that we will not become any fifth economy in the world, despite the fact that the lag is small - to Germany we are five to six percent, if we count GDP in purchasing power parity. This gap could be bridged. But the goal itself is illusory, because the main task is not getting into any ratings, but a stable growth in the well-being of the majority of the population, with which we have had very big problems in the last four years and, in my opinion, they will not be solved in the near future.