ELISEY LEONOV: “ANY SUBSTANTIAL CHANGES IN THE TAX SYSTEM SHOULD START WITH ANALYSIS OF BUDGET EXPENDITURES EFFICIENCY”

In his interview with the Nezavisimaya Gazeya, Elisey Leonov, Researcher of the Tax System Development Department of the Gaidar Institute speculates about whether a tax burden reduction will help the Russian economy retain financial stability.

The study of the Institute of Economic Forecasting, RAS published by the Nezavisimaya Gazeta daily has revealed that “the indirect taxation system reproduces inequality in the country.” To improve the situation of the most disadvantaged groups, experts call for reforms, particularly value-added tax (VAT) reduction or exemption. But it is not enough: IEF RAS regards “overall tax burden reduction” as a temporary anti-crisis measure, as well.

“Non-oil and gas tax revenues of the budget are mainly formed by means of VAT, personal income tax and profit tax. All of them are pro-cyclical, but if all three are compared to each other, VAT is the most stable one. So, in terms of budget stability amid the crisis and future uncertainty about the oil and gas portion of tax revenues, VAT is a key tax,” Elisey Leonov believes.

However, according to Elisey Leonov in the current situation a tax burden reduction may not work as a tangible growth driver, but it puts inevitably under threat fiscal stability and, consequently, leads to a decrease in budget liabilities. Furthermore, the expert specifies that the fiscal system is far from being a source of Russian economic problems. “The fiscal system requires fine tuning today, not reforming,” Elisey Leonov says. Any substantial reforms of the fiscal system should start with analysis of budget expenditures efficiency, the expert notes.