Spending on social benefits is cut, but law enforcement budget increases
The government has continued to cut social benefit in an effort to preserve the existing socio-economic model, albeit somewhat curtailed. Simultaneously, expenditure on law enforcement has been scaled up, suggesting that the 2015 election campaign might follow a harsh scenario.
The House of Representatives approved. a bill introducing a fee for using private vehicles. Recently the government has come up with a bizarre assortment of initiatives to replenish the state budget, but most of them have not been implemented. The authorities used these initiatives to draw people’s attention away from real measures, which pick into people’s pockets and reduce social benefits.
For example, earlier in 2013, Prime Minister Myasnikovich proposed to tax the unemployed, and President Alexander Lukashenko proposed a $100 ‘exit’ fee. These initiatives were disavowed following reactions in society. An independent sociological poll by the Andrei Vardomatski Belarusian Analytical Workroom suggested that about 75% of Belarusians had heard about the $100 ‘exit’ fee initiative, of which 55% were against it. It is worth noting that such bizarre initiatives often 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.
Nevertheless, the Belarusian authorities followed through with certain unusual initiatives. Some tax alterations and amendments which affect various social groups were introduced without any public debate.
For example, the government will introduce a fee for using private vehicles. As of 2014, a recycling fee for imported foreign cars and import tax for corporations will be introduced; rental-housing tax will be increased by 12.7%. In addition, the Belarusian authorities will raise tariffs on goods and services subsidized from the state budget.
The government will also reduce social benefits. The 2014 draft budget envisages budget cuts for culture and education. Simultaneously, the draft budget envisages more spending on law enforcement, suggesting that the authorities are concerned about a potential rise of social tensions ahead of the presidential campaign.
It is worth noting that the 2014 socio-economic development plan envisages lay-offs for 70,000 workers. Recently, Minsk Tractor Plant and Minsk Automobile Plant management curtailed production and considerably cut workers’ wages. This trend can be traced to the regions: Mogilevkhimvolokno, one of the largest regional enterprises, plans to lay off 30% of its employees.
Evidently, Lukashenko has limited opportunities to buy people’s loyalty with pay rises and social benefits, so he is counting on law enforcement to ensure social stability. In short, the authorities plan to preserve the existing socio-economic model at the cost of some population groups.
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.