Higher income tax to improve 2015 budget balance

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April 22, 2016 18:56

Under the pretext of improving birth rates with financial means, Belarus’ income tax might be raised from 12% to 13% in 2015. In 2014, income tax was one of the main sources of budget revenues. Higher income tax rate might compensate for the losses in revenues from the profit tax (corporate tax). The additional budget revenues will be partially spent on helping large families, however the bulk of it will be spent on other state programmes and patching other holes in the budget. 

The Finance Ministry reported that in H1 2014, Belarus’ consolidated budget raised EUR 1.1 bln from the income tax, which is 20% more compared to the same period in 2013. After VAT revenues (EUR 2.3 bln), income tax is the second-largest source of budget revenues. The growth of income tax proceeds was due to wage-growth in Belarus.

The Belarusian authorities are proposing to increase the income tax, citing the need to raise the birth rate in order to improve Belarus’ demographic. If increased from 12% to 13%, additional budgetary revenues from the income tax would total circa EUR 185 mln during one year (provided that wages did not change). In 2015, the government also plans to reduce the corporate tax from 18% to 15%, and raise the VAT from 20% to 22%. As a result, the government aims to increase budget revenues.

In part, additional budgetary revenues will be used to support large families. The government intends to open a deposit for each newborn, which will be corrected by the BYR/USD exchange rate. Meanwhile, in 2015 Belarus might also increase her budget expenditures on power structures, recalling the events in Ukraine and preparing for the presidential elections in Belarus. Sanctions imposed by the United States and the EU on Russia may reduce Belarus’ foreign trade revenues. In addition, regardless of the planned modernisation reforms, the government will continue supporting agriculture through the state-funded programmes. The government anticipates raising additional funds to cover the additional costs by increasing VAT and income tax rates.

The government has decided to redistribute citizens’ incomes once again. While it may adopt some measures to stimulate the birth rate growth, it will spend the bulk of the additional proceeds from higher taxes on addressing other ongoing needs.

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Belarusian and Ukrainian Defence Ministries entangle in confrontation spiral
October 02, 2017 11:57
Фото: RFRM

Over the past year, military-political relations between Minsk and Kyiv have become complicated. Due to their high inertia and peculiarities, this downward trend would be extremely difficult to overcome.

The root cause of the crisis is the absence of a common political agenda in the Belarusian-Ukrainian relations. Minsk is looking for a market for Belarusian exports in Ukraine and offers its services as a negotiation platform for the settlement of the Russo-Ukrainian war, thereby hoping to avoid political issues in the dialogue with Kiev. Meanwhile, Ukraine is hoping for political support from Minsk in the confrontation with Moscow. In addition, Ukraine’s integration with NATO presupposes her common position with the Alliance in relation to Belarus. The NATO leadership regards the Belarusian Armed Forces as an integral part of the Russian military machine in the western strategic front (the Baltic states and Poland). In addition, the ongoing military reform in Ukraine envisages a reduction in the number of generals and the domestic political struggle makes some Ukrainian top military leaders targets in politically motivated attacks.

Hence, the criticism of Belarus coming from Ukrainian military leadership is dictated primarily by internal and external political considerations, as well as by the need to protect the interests of generals, and only then by facts.

For instance, initially, the Ukrainian military leadership made statements about 100,000 Russian servicemen allegedly taking part in the Russo-Belarusian military drill West-2017. Then the exercises were labelled quazi-open and military observers from Ukraine refused to provide their assessment, which caused a negative reaction in Minsk. Further, without citing specific facts, it was stated that Russia was building up its military presence in Belarus.

Apparently, the Belarusian and Ukrainian Defence Ministries have entangled in a confrontational spiral (on the level of rhetoric). Moreover, only a small part of the overly hidden process has been disclosed. That said, third states are very likely to take advantage of the situation (or have already done so). This is not only about Russia.

The Belarusian Defence Ministry officials are restrained in assessing their Ukrainian counterparts. However, such a restraint is not enough. Current military-political relations between Belarus and Ukraine are unlikely to stabilise without the intervention of both presidents.

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