Forgive us, Kudrin!

End of oil and gas euphoria

Life itself intervened in the dispute about what the value-added tax (VAT) rate should be. The financial crisis made populist economic decisions impossible. To reduce VAT now means to deprive the state budget of at least some predictable income. But the topic of the ill-fated tax, as The New Times found out, turned out to be much broader.

Discussions about whether to reduce the budget-forming value-added tax ¹ , were conducted for a long time and partly resembled a dispute between "sharp-pointed" and "blunt-pointed", although they had a somewhat deeper meaning.

Dispute of like-minded people

Reducing the tax is a free hand for market entities, business, it is a revival of economic activity. In addition, the reduction of VAT will most likely lead to an increase in its collection. So says the camp, which has found a kind of "roof" in the Ministry of Economic Development. The idea of ​​reducing the tax from 18% to 12% was especially actively lobbied by business associations: the Russian Union of Industrialists and Entrepreneurs, Delovaya Rossiya, OPORA. They made their last attempt to convey their position to the very top on September 15 at a meeting with the President of Russia. “Two or three years ago, the topic of tax cuts was not so relevant,” Boris Titov, head of Delovaya Rossiya, said at a meeting in the Kremlin. “But since companies switched to white pay schemes, it has become more relevant.” In an interview with The New Times, Titov explained: “For medium-sized businesses, reducing VAT is a matter of life and death. According to a survey we recently conducted, it turned out that 58% of businessmen believe that VAT is holding back development.”

This point of view is opposed by another: it is impossible to reduce the tax - budget revenues fall out, which cannot be restored. Each percent reduction in the VAT rate "weighs" almost 100 billion rubles missing from the budget. In addition, the increase in collection is not guaranteed at all. These are the arguments of the experts, whose shield was the Ministry of Finance.

It is significant that like-minded people argued publicly - liberal ministers Elvira Nabiullina and Alexei Kudrin. President Medvedev held a meeting last week, as a result of which it was decided: the VAT rate until 2009 remains unchanged. Which means: a hardware victory was won by Kudrin, who received the contemptuous nickname "accountant" from our Keynesians and conductors.

However, the dispute was actually about more meaningful matters than a simple recalculation of lost income.

Forgive us, Kudrin!

It turns out that the "budget frenzy", expressed in the unwillingness of the Ministry of Finance to reduce the VAT, print the Stabilization Fund, increase government spending to infinity, is not just a consequence of a mechanistic approach to the nature of the economy or a manifestation of human stinginess. This is a view of economic phenomena as something, although subject to certain laws, but not always predictable. Did they say that there might come times when stabilization money might be needed? They spoke. Nobody believed. Now you have to believe. Did they say that the price of oil is an unpredictable parameter in principle? They spoke. Only no one listened in narcotic ecstasy from GDP growth. We got what we were supposed to get - lower oil prices. Have they argued that government spending, injections into state corporations, passion for state capitalism and faith in the power of the state are immediately reflected in such an indicator as inflation? Approved. Few people listened in the era of seven fat years. We got what we were running from: double-digit annual inflation.

So the VAT dispute is not just a counting nature. And related issues related to the fate of the National Welfare Fund or the price of oil are also partly political. Because, as it turned out, there is a responsible policy, which consists in living within one's means, and there is an irresponsible one, fueled by oil and gas euphoria, faith in the omnipotence of the state, and smooth econometric calculations. Oil is down, the dollar is up, the stock market is down. Risks are different. Economic policy is also different. To begin with, at least accounting, according to Kudrin. Back in the spring, when the crisis manifested itself on world markets, at one of the conferences, Anatoly Chubais called on lobbyists to come to the office of the Ministry of Finance on Ilyinka, fall on their knees and shout: “Forgive us, Kudrin!” Now this call has become even more urgent: without exception, all the forecasts of the so-called monetarists came true.

The victory of monetarism

Yegor Gaidar, the chief monetarist of our time, wrote: ² “…Tax innovations, built on the simple idea of ​​lowering the tax rate and relying on the fact that collection growth is guaranteed, have one advantage: public politicians like them.” This is another political component of the plot. Not surprisingly, the VAT dispute did not end with the end of the 2007-2008 election epic: economic policy remained predominantly populist.

In his work, Gaidar showed that an increase in VAT collection with a decrease in the rate has not been proven, and it is impossible to put a hypothesis into any realistic calculations. On the other hand, it is easy to calculate what will happen if the collection rate does not increase when the rate is reduced to 12%: about 2% of GDP will fall out of budget revenues, which is much more than the federal budget spends, for example, on education.

Of course, it is quite possible that the representatives of the highest Russian authorities, when making the decision “not to touch the VAT”, were guided not at all by monetarist considerations, but, for example, by militaristic ones. An urgent and dramatic increase in defense spending is now on the agenda, and the golden rain of petrodollars is ending. How, under these conditions, to make a tax hole in the budget with your own hands?

“It is not difficult to make the state of public finances in Russia dependent on the mood of brokers in New York,” writes Yegor Gaidar. “A radical reduction in the value added tax rate will help solve this problem.” It seems that the Russian authorities have achieved this goal. But we decided not to aggravate the problem by lowering the VAT rate.

The VAT rate was initially 28%, then from 1993 it was reduced to 20%, and from 2004 to the current 18%. In 2007, VAT revenues to the federal budget amounted to 29.7% of the budget revenues, and in 2008 they should grow to 34%. Therefore, proposals to reduce VAT have always encountered resistance from the Ministry of Finance.

In 2004, Mikhail Kopeikin, Deputy Head of the Government Staff, proposed reducing VAT to 13%. He was supported by Prime Minister Mikhail Fradkov, but ministers Alexei Kudrin and German Gref opposed it. In May 2005, Vladimir Putin announced the need to reduce the base rate of VAT in his budget message. The item on bringing VAT up to 13% "in the near future" was included in the government's medium-term program for 2006-2008. In February 2007, at a meeting between Putin and the Bureau of the Board of the Russian Union of Industrialists and Entrepreneurs, businessmen started talking about reducing VAT to 10%. In response, Finance Minister Kudrin agreed to reduce VAT to 15%, but only in exchange for an equivalent increase in the mineral extraction tax (MET) and the abolition of the preferential 10% VAT rate for a number of socially important goods.

In February 2008, President Putin at the State Council, and then presidential candidate Medvedev, advocated "the maximum reduction in the VAT rate." In August, Prime Minister Putin held a special meeting on the country's economic development strategy until 2020, after which he instructed Ministers Kudrin and Nabiullina to agree on positions on the amount of VAT.

On September 18, at a meeting with President Medvedev, the question of reducing the tax rate was again postponed until 2009.

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¹ VAT is a form of withdrawal to the budget of a part of the value added, which is created at all stages of the production process of goods, works and services and is paid to the budget as it is sold.

² E. Gaidar, A. Chubais. Economic notes, M., 2008.