New price-hike wave: authorities feel confident
As of October 1st, 2013 the base value in Belarus increased. Urban public transport and suburban passenger service tariffs went up, as well as some utility services tariffs and cigarette prices.
A new wave of price hikes has not increased tension in Belarusian society. Controversial proposals by the authorities, such as the potential introduction of an ‘exit tax’, have diverted citizens’ attention from real price rises. Even though such proposals will most likely not be implemented on such a scale, the authorities might take some unpopular measures when their resources drain completely and the welfare state continues to shrink.
Recently, senior government officials voiced a few scandalous initiatives aimed at picking citizens’ pockets. As a rule, such initiatives are not implemented. For example, speaking at the ‘Dazhynki’ [Harvest] Festival in Zhlobin, the president disavowed his idea about the USD 100 ‘exit fee’ for citizens travelling abroad. In the meanwhile, the state has increased tariffs and prices to replenish the state budget.
The government is committed to step-by-step price increases, which are acceptable for the population. In 2011, a one-time 31% increase in petrol prices resulted in a mass protest by drivers. Lukashenko had to intervene and to restrict the petrol price growth to 2-3% quarterly.
The government is committed to adhere to the President’s recommendations which help to neutralize the negative reaction from the population. Despite the high growth of prices in Belarus in H1 2013, an IISEPS poll says that president’s electoral rating went up in September 2013 to 42.6%.
Several unusual ideas were voiced by the government about how to replenish the state budget at the cost of some population groups. These groups of citizens do not seem to interest the president as target groups for his electoral rating. The opposition is also limited in how it can use this group to strengthen its position in society.
On September 30th, Peter Grushnikov, First Deputy Minister of Labour and Social Protection reiterated the initiative concerning a tax on the unemployed, suggesting that they should pay for state social services in full. This is not a new initiative: it was first voiced in 2011 by president Lukashenko and aimed primarily at Belarusians leaving to work abroad. This summer, the idea was revived by Prime Minister Mikhail Myasnikovich, who talked about the need to tax the unemployed.
The authorities have also significantly limited the possibilities for the opposition to convert citizens’ discontent into support for opposition initiatives. The ‘People’s Referendum’ initiators cannot fully respond to the authorities’ unpopular decisions. Recent amendments to the Electoral Code have banned issues related to the state’s fiscal policy from being put up for referendum. Fiscal policy includes budgetary, tax and fees issues.
Thus, the controversial initiatives aimed at picking citizens’ pockets distracted attention from the real measures implemented by the authorities to replenish the budget at the citizens’ expense. Meanwhile, the authorities are also ‘testing’ the implementation mechanisms for unpopular measures in respect of certain population groups – to be used when the need to replenish the budget becomes acute again.
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.