Belarusian authorities test people’s reaction to bizarre tax initiatives
The government proposes to introduce a fee for using private vehicles, as well as a tax on so-called ‘spongers’ (i.e. people who do not work for a living and do not contribute to society).
The authorities’ bizarre tax initiatives are meant to measure society’s response and to find the best way to pick citizens’ pockets to replenish the budget. The authorities are seeking ways to seize people’s income so that it has the least impact on the president’s approval rating and will not result in open protests. The state plans to preserve the current economic policy in the short and medium term by reducing the welfare state.
In January – September 2013the national budget surplus was BYR 1299.2 billion. According to preliminary estimates, by the year-end, the budget deficit will be BYR 411.5 billion (about USD 44 million). The deficit will be caused by the shortage of income tax and foreign trade revenues. In January – September 2013 only 41.7% of the projected income tax were listed to the budget, and only 60.3% of foreign trade revenues. In 2013 Belarusian imports reduced and export duties on potash zeroed out, creating budget deficit by the year-end.
Budget deficit could be recovered by two means: either by cutting costs or by finding additional sources of revenues. While the government could reduce expenditure on security agencies, banks, re-compensations, and other budget items, it focuses on citizen’s pockets and additional taxes for population as the new sources of budget revenues.
The authorities said they would increase the share of cost recovery for housing and communal services in 2014, would raise the excise duties on motor fuels by circa 14.5% and came up with some other exotic initiatives to pick citizens’ pockets.
Belarusians respond sluggishly to violations of their civil and political rights and freedoms, but are quite ready to defend their economic interests. Some previously announced bizarre initiatives, such as the introduction of new fees and taxes, were disavowed following reactions in the society. Over 25,000 people signed a petition against introduction of the USD 100 ‘exit’ fee.
It is worth noting that such bizarre initiatives have not been voiced by Lukashenko, but by other public officials. Lukashenko wants to avoid a negative impact on his approval rating before the elections. The latest initiative, regarding a tax on cars, was announced by a minor Finance Ministry official.
Simultaneously, some new tax initiatives have developed. For example, Prime Minister Myasnikovich’s proposal to tax the unemployed (up to USD 280 per annum) and the tax on using private cars have become draft laws. Neither the government nor the ministry officials are sensitive to society’s reaction, their future careers depend entirely on the president’s goodwill.
In addition, president Lukashenko demanded to complete the transition to a contract employment system. This mechanism proved effective in reducing workers’ protest moods before the 2006 presidential elections. According to Statistics Ministry, by late 2005, 92 % of workers in Belarus had been enrolled in fixed-term contracts system.
The authorities continue searching for the least painful ways to replenish the state budget at the expense of the population without changing the current policy.
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.