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. Last Updated: 07/27/2016

Big Rise in Tax Take Written Into Budget

The Finance Ministry unveiled its year 2000 draft budget Wednesday, promising a miraculous boost in tax collection to tackle a tough year of hefty foreign debt repayments.

"The year 2000 is going to be devoted to tax collection," Finance Minister Mikhail Kasyanov said at a news conference presenting the final version of the draft budget. "It is the most important policy for the government."

The Finance Ministry plans a primary budget surplus of 3.18 percent of gross domestic product next year, up from 1.64 percent this year but lower than the surplus of 3.5 percent to 4 percent said to be demanded by the International Monetary Fund.

Kasyanov said the budget would help Russia service its foreign debts in 2000, and projected revenues to stand at 745.14 billion rubles ($23 billion at the projected rate of 32 rubles to the dollar). Spending plans stand at 803 billion rubles.

The projected growth in federal revenue for 2000 of slightly more than 270 billion rubles over the previous year would be chiefly fueled by rising tax collection, he said.

But even though tax authorities said Wednesday that revenues for August were already running ahead of forecast after a record tax collection in July, analysts doubted the recent boost in performance would extend to the Finance Ministry's ambitions for 2000.

With the uncertainty and high spending campaigns of the presidential elections looming, even economists close to the Finance Ministry cast doubt on the projections.

"The forecast increase in tax collection is not realistic. Even without the unpredictability factor of who will win in the presidential elections, collecting taxes will be much more complicated in the pre-election campaign period," , said Alexander Ustinov, of the Finance Ministry's economic expert group. "The political will to enforce payment is likely to be weak as elections near," he said.

Even as Kasyanov said Wednesday the government was mulling a hike in export tariffs for energy producers, including natural gas monopoly Gazprom, cracks in the government were again clearly on show when Fuel and Energy Minister Viktor Kalyuzhny slammed any further taxation of the sector.

"I wouldn't change anything," Interfax quoted Kalyuzhny as saying. "The oil companies have to have the opportunity to change investment policy and invest in production increases."

Kasyanov, however, accused defenders of the sector of peddling anti-market policies. He said the proposed rise in oil tariffs from 5 euros ($5.21) to 7.5 euros per metric ton, and a 3 euro export tax to be levied on every 1,000 cubic meters of gas, were necessary to redress the harmful flow of most of Russia's energy resources to more lucrative markets abroad.

"The export tariff hike is not to boost revenues for the federal budget, but it would be the introduction of a market mechanism to protect domestic consumers," Kasyanov said.

Analysts said, however, that the government was once again banking on the energy sector to fill up state coffers.

"The draft budget outlines a world oil price of $19 to the barrel. The Finance Ministry is obviously relying on gaining most of their revenues from large energy corporates," said Natalya Orlova, an economist at Alfa Bank.

"But the forecast price could prove too optimistic and make the whole budget shaky," she said.