17 Jul 2023 14:02

Shokhin: Mass privatization could help replenish budget, business ready to participate

YEKATERINBURG. July 17 (Interfax) - The Russian government's ability to redistribute the expenditure side of the budget is limited, which renders it necessary to search for additional sources to replenish the budget, and raising taxes should only be considered as a last resort, Alexander Shokhin, president of the Russian Union of Industrialists and Entrepreneurs (RSPP), believes, voicing the opinion that the way out could be to increase the public debt and conduct mass privatization with the sale of assets that are interesting to business.

"We have very many recurring expenses, including the social safety net for the population. These are not one-off compensations. Allowances are established that are constantly reproduced in future periods. Therefore, these expenses not only cannot be reduced, but they must also be indexed. Not taking into account defense expenditures, the ones for security, social, and others, have grown very significantly in our country, and they will probably not be reduced. Therefore, it is clear that it is necessary to scrape together somewhere. However, the bottom line is not raising taxes, as raising taxes is generally a last resort," Shokhin said in an interview with Interfax.

Shokhin estimated the size of a possible sequestration at "the traditional 10%", noting that the Finance Ministry had already announced such a figure.

Shokhin considers increasing taxes to be an extreme measure, and, in his opinion, the option with a one-time collection from excess profits from past periods, which is being implemented as a windfall tax this year, should not be repeated at all in the future.

"We are against one-off contributions. We are in favor of having a tax system that responds, including to non-standard situations. We believe that more windfall tax cannot be implemented. It is better to raise profit tax, and we immediately suggested this. I think that it is incorrect to come up with a retrospective tax scheme. Or it would be necessary to amend the constitution so that business can 'be pleased' with such innovations," Shokhin believes.

Shokhin proposes considering mass privatization as an alternative to additional collections from business, though not in a version when obviously unprofitable state and municipal unitary enterprises are put up for sale.

"If you think that a business has money, well, then sell what you do not consider just unnecessary state property, but what you are willing to sacrifice, realizing that this business will not squander, but, on the contrary, it could even manage more efficiently. We have many state-owned companies, state corporations, and so on, even an excess, and in both the banking system and in the industrial sector. This could provide hundreds of billions of rubles, and we need to decide on this. The RSPP and many members of the RSPP bureau have publicly proposed launching such a mass privatization mechanism," Shokhin said confidently.

"The state feels bad for the tasty morsels, and what it is ready to give away is not needed by anyone, neither the state nor business, because these are all sorts of state unitary enterprises and municipal unitary enterprises that require large, serious investments," Shokhin added.

Moreover, Shokhin said that in order to replenish the budget, it would be necessary to consider increasing sovereign debt, whose level is currently low relative to GDP. However, the cost of government borrowing is directly linked to decisions on the key rate, and the Central Bank of Russia (CBR) announced a possible increase in the rate earlier this week already.

According to the Electronic Budget resource, Russia's budget revenues as on July 10 totaled nearly 12.539 trillion rubles, expenditures totaled nearly 15.78 trillion rubles, and the shortfall totaled 3.241 trillion rubles.

Based on the information from the Federal Treasury, the annual allocations for expenditures have been clarified, and, accordingly, the total amount of the budget deficit in 2023. According to the budget law, expenditures in 2023 are planned at nearly 29.056 trillion rubles. According to the Treasury, the current approved budget allocations total about 29.896 trillion rubles. Meantime, revenue allocations remained at about 26.13 trillion rubles. Consequently, the budget shortfall is currently estimated at about 3.766 trillion rubles rather than around the 2.925 trillion rubles as stipulated by law.

According to preliminary data from the Finance Ministry, Russia's federal budget was fulfilled at a deficit of 2.595 trillion rubles in January-June. The figure has decreased by 816 billion rubles over the past month. The ministry estimated the deficit at 3.411 trillion rubles in January-May.