Alexey Vedev, Head of Financial Studies Department of the Gaidar Institute, told RIA Novosti commenting on the report dedicated to the overcoming of the current crisis that cash "distribution" to households by way of increased benefits and salaries can result in the acceleration of inflation in Russia, however, the proposal to abolish taxes on low incomes is reasonable.

Earlier, the “Vedomosti” newspaper reported that Academicians Abel Aganbegyan, Boris Porfiriev and Alexander Shirov, RAS Corresponding Member, Director of the RAS Institute for Economic Forecasting, proposed to carry out a number of radical economic reforms amid a pandemic COVID-19 in their report "On Overcoming the Current Crisis and Ways to Develop the Russian Economy".

Alexey Vedev focused on the Academicians’ proposal to "distribute" cash to people through increasing minimum wages and salaries, pensions and unemployment benefits. Thus, according to Alexey Vedev, it is proposed to revive the growth model based on the expansion of domestic demand but without investment activity.

“I believe, this model will not work effectively. It is more likely that we will get an increase in the price index and acceleration of inflation. I think, the proposal to abolish taxes on low incomes is reasonable, but the introduction of a progressive taxation scale for the rich is not evident and needs to be discussed further,” said the Gaidar Institute expert.

He also expressed the opinion that discussing the subject of "long" money in the economy is outdate. “This concept is relative by itself and does not have a clear definition. To accelerate the rate of economic growth, it is important to increase public investment, which will affect the investment activity of private business,” says Alexey Vedev.

The proposal of Academicians to switch regions to self-financing and self-sufficiency has been discussed over the past 15 years as part of the reform, however, according to the expert, it cannot be fulfilled quickly.

“We will still have a fairly large number of subsidized regions, therefore, in principle, this is a discussion about changing the tax system as a whole,” he explained.

Speaking about the proposal to prohibit banks from issuing loans at rates more than twice the key rate, Alexey Vedev highlighted that the key rate impact on the financial sector has a delayed effect.

“Such a restriction is inadequate for the current market environment. Indeed, it is clear that such a direct control over the market instrument will result in the increase in the overhead costs associated with bank loans,” the expert concluded.