Dependence of Russian Budget from Raw Materials Export

The dependence of the Russian budget from oil prices has strengthened incredibly: for the budget to be deficit-free in 2010 the oil should cost USD 105 per barrel (USD 62 per barrel in 2008, USD 99 per barrel in 2009). This is in sharp contrast with USD 20-40 per barrel planned in the budget of 2000-20061. 


Indeed a strong dependence of the tax earnings from raw materials export the prices for them fluctuating considerably makes the problem of balancing the revenues and expenditures of the budget especially acute. The main part of the Russian budget system expenditures being defined by export of raw materials used as energy carriers, the tax earnings to the RF budget system can be divided into two components: earnings that will exist in mid-term external economic situation for many years (structural components) and earnings that are accounted for by favorable dynamics of the world prices for energy carriers (market-depending component).


The decomposition of tax earnings of the Russia’s budget system into structural and market-depending components is based, first, on the results of similar decomposition of the real GDP level, which is an index acting as a taxation base. Second, tax earnings upon exclusion of the influence of changes in tax legislation coming into effect in 2002-2007 can be progressive or not progressive with regard to oil2.


So, while according to the RF Ministry of Finance, tax earnings in the RF economy in 2008 on the whole made 36.7% of the GDP, in concordance with IET calculations the component of incomes accounted for by favorable situation at the world market of energy carriers and contribution of other factors (including state policy, moods of investors and population etc) made 8.3% of the GDP, while the earnings that will take place the oil price for many years remaining average (structural component) – will make only 28.5% of the GDP.


In other words, the level of tax load in Russia not taking into account its situational component is considerably lower than in the OECD countries3 and corresponds to the theoretical value of burden defined as a result of the international comparisons executed by the IET with the help of econometric modeling4. This level of tax burden is not economically justified since it, first, does not take into account expense liabilities of the Russian Federation in the social sphere, which is the consequence of population ageing and is not covered by the reform of the single social tax, which came into effect this year.


Kazakova M.V. – PhD, Head of the Department for Economic Development Problems



1 http://www.vedomosti.ru/personal-finance/news/2010/03/17/970394
2 For more details see Kazakova M. V., Sinelnikov-Murylev S. G., Kadochnikov P. A. Analysis of structural and situational components of tax burdenin the Russian economy. Scientific works No129R – Moscow, IET, 2009 Edition – 189 p. (in Russian, available on www.iet.ru).
3 According to the data of Revenue  Statistics, 1965–2008 (2009 Edition, OECD, www.oecd.org), the average value of load in OECD countries in 2000-2008 fluctuated within 35-36% of the GDP.
4 Theoretical value of tax load in the Russian Federation basing on the level of economic development should make 29.3% of the GDP (model estimated according to OECD data for 2007) or 28.2% of GDP (model estimated on the basis of OECD data for 195-2008).