Authorities plan to cover budget losses at cost of unemployed
President Lukashenko has ordered the government and the executive office to finalise the decree on ‘parasites’ within a month.
The state has needed to adopt a range of unpopular measures in order to replenish the budget in the year of presidential elections by additional expropriation of household income. In order to avoid popular discontent from growing as well as negative effects on president’s rating, the authorities are first announcing harsh measures and then somewhat softening their approach, as in the past. Additionally, because ‘administrative’ tools have been exhausted, the Belarusian authorities are considering market tools which would help attract surplus of household income to the country’s economy.
The state has already undertaken a range of measures designed to cut the social safety net which includes pension coverage. Besides, the government put up the income tax rate by 1% bringing it to a total of 13% starting from this year. During 2015, a rise in excise duty on alcohol, tobacco and gas is expected. Nevertheless, such income will not cover the budget losses coming from the underpayment of previously expected income. Also, the authorities are due to pay foreign debt of more than $4 billion this year.
According to statements by Belarusian officials, some 400,000 people or almost 7% of the employable population do not have any official income. Not only does the state not foresee the possibility of providing this population group with any social support, it is trying to compensate for its own short-comings in the country’s socioeconomic development at their cost.
The initiative to toughen up the approach to the officially unemployed came from the Ministry of Internal Affairs. In autumn 2014, it proposed introducing criminal and administrative responsibility for ‘parasitism’. As a result, the Ministry of Labour and Social Protection developed a decree which foresees enforcing financial and administrative sanctions for the unemployed.
Thanks to this document, the authorities are counting on substantial revenues to the budget. It assumes that a substantial number of ‘parasites’ are employed in the shadow economy or work abroad. However, instead of using market enforcement actions designed to attract such people to the legal labour market, the state prefers the repressive measures of expropriating household income in order to replenish the budget in the year of presidential election.
At the same time, the authorities continue to look for ways to expropriate income from the population, and are also considering market tools. President Lukashenko voiced an idea to develop financial markets in order to allow the population to invest their savings: “A financial market is an additional source of income for enterprises. We can widen it by attracting the population’s savings. Let them invest in stocks and bonds. People should have a wide choice for investing their savings”.
Recently, the authorities decided to undertake a range of measures designed to keep household money in banks for longer periods of time. Besides the mode of ‘tough austerity’ also influences previously popular consumer loans which stimulated consumption. Since the start of the year, the state has banned microlenders from giving ‘payday loans’ to the population. The Chairman of the National Bank, Siarheu Dubkou, underlined that starting from this year microlenders can only lend money to legal entities, entrepreneurs and craftsmen: “Nowadays such companies lend money not for consumption but for business development and the development of private initiatives”. At a time of depleting resources, one can expect the authorities to continue introducing ‘exotic’ measures while reintroducing older measures to expropriate income from the population.
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.