Cross-subsidizes in the housing and utilities: the rich pay for the poor.
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”.
The Labour and the Tax Ministries are considering the possibility to include persons engaged in some economic activity without forming a legal entity in the social security system. When the decree No 337 comes into effect, the number of private entrepreneurs is likely to reduce due to the possibility of reducing the tax burden when switching to a tax payment as an individual. 95% of self-employed, including PE, pay insurance premiums on the basis of the minimum wage. The number of self-employed citizens is expected to increase, the number of insurance contributions to the pension system from PE will decrease, the number of citizens who will pay a fee to finance government spending will decrease by several tens. Self-employed citizens have the alternative not to pay social security fees and save resources for future pensions, which, given the gradual restriction by the state of pension requirements could be a more long-sighted option.