Local budgets revenues
Local governments face insufficient revenues from taxes due to low profitability of enterprises and “frozen” salaries. If the central government does not finance deficits of the local budgets, the implementation of social development programmes by the local authorities is at risk.
Currently, regional administration faces two challenges: 1) growing number of unprofitable enterprises, in the first place in the construction industry. As a consequence, there is an outflow of skilled workers to the neighboring Russia. 2) Budget deficit of about Br 4 billion due to insufficient tax revenues as the planned wages growth in the first half of 2011 has not been met.
26 enterprises (or 8.2% of the total) performed at a loss in the first half of 2011. Head of the Economic Department of the Mogilev City Administration Matyushenok said, the most alarming results were observed in the construction industry: the number of unprofitable institutions increased by 3 times (6 companies). Net loss of construction companies has increased by 4 times and amounted to Br 7.2 billion. Experts say prices for construction materials grow faster than the index of construction these days.
Six city companies have reduced their production volumes based on performance results in the first half of 2011.
In Vitebsk oblast the authorities are trying to replenish the budget deficit by implementing checks of individual incomes for undeclared incomes, followed by fiscal sanctions.
For instance, 227 income and assets declarations were assessed for compliance between income and expenses at the request of the law enforcement and regulatory agencies. As a result, 150 violations were found.
Therefore additional Br 183 million was charged by tax inspections on individuals who violated the existing legislation on income and assets declaration. Perpetrators were also charged under the Administrative Code for failing to provide income declaration or for false information in it with overall fines amounting to Br 18 million.
The construction industry is in crisis. A month and a half ago massive concessional lending to the population has been curtailed for an indefinite period of time, budget expenditures for the construction of social facilities were cut down.
In Brest, the construction of a number of important social facilities (hospice, a school garden, a puppet theater) has been suspended, while the construction of a city hospital and an additional building of the Children’s hospital has been postponed indefinitely. Reconstruction works of a section of the Children’s clinic No 1, reconstruction of the old building of the regional children’s hospital and of the gynecological department of the regional hospital are still ongoing given the financing for reconstruction was allocated in the beginning of the year. Construction in Brest moves by inertia: reconstruction of facilities has been started however it will continue only to the moment there are funds allocated for it. Construction companies hope for the resumption of concessional lending. Currently active construction works are carried out only at the sites of commercial real estate and in settlements with population of at least 20 thousand people. In order to keep workers occupied large construction companies are forced to seek for orders in Russia.