The State of Public Finance, Fiscal Policy, and the Budget in Russia

Publication date
Friday, 21.04.1995

S. Sinelnikov-Murylev

Westview Press

The Soviet system of public finance had two stable, primary sources of budget revenue: deductions from corporate profits and a turnover tax. State spending steadily increased, however, and by 1990 the state's financial situation had worsened dramatically. The escalation of social welfare programs combined with increased government subsidies after a rise in agricultural prices in fall, 1990, and in wholesale prices of industrial goods in January, 1991 (while retail prices remained unchanged}, produced a drastic financial situation. Both the federal and republic governments therefore sought to increase public revenues relative to GDP. Additional taxes were introduced, such as a sales tax and a payroll tax, to contribute to a stabilization fund. Social security payroll deductions were increased to 26 percent, while 20 percent of enterprises1 depreciation allowances was withdrawn. Finally, exporters were required to sell part of their hard currency earnings to the state at an overstated ruble exchange rate. These measures were aimed at increasing the mandatory tax payment rate, which in previous years had ranged from 42 to 48 percent (around 55 percent of the GDP).



The State of Public Finance, Fiscal Policy, and the Budget in Russia. // Privatisation, Conversion, and Enterprise Reform in Russia, Ed. By M. McFaul and Tova Derlmutter with a forward by Kenneth J. Arrow. - Westview Press. Oxford. 1995.

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