Budget rule cutoff at $60/bbl not relevant, needs to be fine-tuned - Finance Minister Siluanov

MOSCOW. April 23 (Interfax) - The cutoff price of $60 per barrel of oil in the budget rule probably no longer meets the challenges of the times, and the budget rule needs to be fine-tuned to minimize external risks, Russian Finance Minister Anton Siluanov said at an expanded meeting of the Finance Ministry.

"The main risk now is the development of trade wars and, accordingly, the reduction in export opportunities for countries, including Russia. We have reduced our dependence on oil and gas, and the share of oil and gas revenues in the structure of federal budget revenues today is only a quarter of revenues. Some time ago, the share was nearly 50%. The budget rule sets the base price at $60 per barrel, though the cutoff probably no longer meets the challenges of the times today," Siluanov said.

"So what is the task? To set up a budget rule to minimize external risks, and the liquid assets of the National Wealth Fund (NWF) must be brought to the level of three years of uninterrupted financing of expenditure obligations during stressful developments in the oil market. This would be the key to the stability of budget finances and the country's financial system as a whole," he said.

The issue of the current budget rule cutoff not aligning with present-day realities was discussed at the Finance Ministry's board meeting on Wednesday, he said. Participants in the meeting included Governor of the Central Bank of Russia Elvira Nabiullina, presidential aide Maxim Oreshkin and State Duma Budget Committee Chairman Andrei Makarov.

Budget revenues from natural rent are unstable, and the Finance Ministry plans to shape tax policy in a way that minimizes the impact of this risk in the future, he said.

The current revenue structure of the budgetary system is balanced, with payroll-related taxes (social contributions, personal income tax) accounting for 32% of total revenue, Siluanov said. Consumption taxes - VAT, excises, import duties and recycling fees - make up 28% of total revenue. Capital taxes, which include corporate income tax and special tax regimes, account for 16%, while natural rent also accounts for around 16%.

Revenues from natural rent are a distinctive feature of Russia, and de facto make it possible to maintain lower levels of taxation on other income, primarily citizens' income, with personal income tax and property taxes in Russia lower than the OECD average, he said.

At the same time, the Finance Ministry understands that rent revenues are an unstable source and "in the long term will decline, if not be exhausted entirely at some point," he said.

"Therefore, we see the Finance Ministry's task, considering the future instability of rent revenues, as developing tax policy and administration to minimize these risks. In any case, until 2030 the basic tax framework is fixed and will remain unchanged," he said.

Expenditures must be brought in line with new realities, he said. "Is it possible to do this? Yes, we will have to be more modest in our expectations and ensure greater returns on every ruble spent from the budget," Siluanov said.