Tax on ‘social parasitism’: inefficient, but necessary
After President Lukashenka said that the Decree No 3 envisaging the tax on social dependents would be amended, not abolished, the tax authorities released the decree implementation report. According to the report, the tax authorities failed to administer the tax, moreover, its economic impact was negligible. The decree was meant to be used as an additional tool to regulate labour market and official unemployment.
The tax authorities sent 73 000 notices to potential payers of the tax on ‘social parasitism’, of which 15 000 were able to prove their right not to pay the tax. Only about 10800 people paid the tax, from whom the state budget raised circa USD 1.2 million. Initially, the authorities assumed that in 2016 there would be circa 160000 taxpayers, who would raise circa USD 40 million for the state budget. In addition, they calculated that in the future the taxpayers number would rise up to 400 000, contributing circa USD 300-400 million to the state budget annually.
Independent analysts doubted the efficiency of such a system and pointed at its high costs. In addition, as the tax authorities mailed their notices to tax payers, major shortcomings in the taxpayers’ database were revealed - it listed citizens exempt from tax and the deceased. The authorities failed to respond to requests by ‘Tell the Truth’ campaign and independent media about administrative costs of such a tax. However, indirect evidence shows they were rather high: 27 government agencies and 82 000 organisations were involved in compiling the taxpayers’ database.
Amid growing unemployment and falling wages, despite sharp criticism by independent analysts, some government members and discontent among the population, the Belarusian authorities will not repeal the decree. Instead, they plan to improve the system by exempting some categories of unemployed from the taxpayers’ list.
In addition, as Belarusians get used to the idea, the state may introduce additional systemic measures to raise additional proceeds from the population and expand the list of those liable to pay the tax. So far, people showed their discontent with the authorities’ action by refusing to pay the tax, with some local initiatives collecting signatures to abolish the decree and with some appeals by the opposition.
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.