Cross-subsidizes in the housing and utilities: the rich pay for the poor.

April 22, 2016 18:18

Due to the economic reasons, people currently are not prepared to pay 100% of their housing and utilities bills. The new proposal envisages shuffling off the responsibility to cover the growing spending to subsidize low utility tariffs on to people with high incomes. However, the record-keeping of the rich citizens is problematic and the proposal will reaffirm people with higher incomes in the need to hide income.

On September 21st, 2012 during his visit to Mogilev, Alexander Lukashenko proposed that people with high incomes subsidized housing and utilities tariffs for the rest of the population.

After the June increase in the housing tariffs, the population started covering 23% of the utilities’ costs, provides Belarus’ report to the EurAsEC Anti-Crisis Fund. The rest is paid by the state.

The entire housing and utilities system, instead of reducing the services’ costs, seeks ways to justify the growing costs. Either there are no attempts to contain costs using internal resources or such attempts are not successful.

In the meanwhile, the population actually pays small amounts for the utilities. One bedroom 50 sq. m. apartment utilities costs are not more than USD 25. However, even such a small cost entails regular debts from some citizens groups. A significant increase in the utilities cost could result in people’s dissatisfaction and lead to a significant housing services payment debt.

In these circumstances, the state budget needs additional financial resources to cover the housing utilities costs. The idea to differentiate housing services tariffs was rejected due to fears of social unrest. And therefore the authorities came up with an idea to focus on people with high incomes and to make them liable for covering the needed amount. De facto, the government is talking about a kind of tax on wealth.

Traditionally, Belarusians demonstrate modest incomes to receive social benefits. The authorities cannot count on the voluntary consent by SMEs and entrepreneurs to become such donors. It should be anticipated, that they would start sheltering income to avoid unnecessary attention from the fiscal authorities. If implemented, this idea could transform into a mandatory fee for businesses and individuals if their incomes exceed a certain standard.

This measure is yet another way the government is set to demonstrate its social orientation. Instead of looking for internal funds for the housing system, the government tries to find those who could pay the utility bills for the majority of the population. Businesses, burdened with such obligations will use any opportunity to shadow their real incomes in order not to get into the list of “voluntary donors”.

Similar articles

Increase in terms of currency proceeds return may increase number of Belarusian exporters
June 26, 2017 11:43

According to Decree No. 221 of June 23rd, 2017, deadlines for the completion of foreign trade operations have been extended from 90 to 180 days for exports and from 60 to 90 days for imports. Delayed payments entailed a fine up to 2% of the transaction cost for each day of the delay, but could not exceed the total cost of the transaction. Most companies, when working with new counterparties, require a deferred payment for a period of three to six months. Due to the new regulation, violations are likely to reduce in number, so as the fines. Trade enterprises are likely to expand the assortment list due to the supply of new products in small lots, and the assortment list of exported Belarusian goods could expand, too. The new terms for completing foreign trade transactions would enable medium and small companies on the foreign trade market, exporters and importers are likely to grow in number and the geography of export-import operations could expand.