The Russian Federation may be forced to raise taxes. Meanwhile the Ruble at 100
Russia may have to raise taxes on oil and gas to get more money from the energy industry, considering that current lower-than-expected budget revenues and the risk that oil and gas revenues will remain lower for years could derail plans balance sheet until 2026, second to the central bank of Russia.
“One of the most important factors in medium-term fiscal policy planning will be the risks of depletion of the liquid part of the NWF funds and the stability of the current fiscal rule (the validity is based on 8-8.3 trillion rubles in the 2023-2026 in basic oil and gas revenues)," the Bank of Russia said in its monetary policy guidelines up to 2026, reported by the Russian news agency Interfax .
Under the so-called budget rule, Russia sells foreign currency from its National Wealth Fund (NWF) to make up for shortfalls in oil and gas export earnings or makes purchases in case of surpluses.
“Under conditions of pressure from sanctions on Russia and a gradual cyclical decline in world commodity prices, there is a possibility that oil and gas revenues will remain below the baseline for a long time even with a moderate weakening of the ruble” , the draft says the guidelines.
Last week, as the Russian ruble continued to fall, the central bank effectively abandoned the fiscal rule temporarily after saying it would not make foreign exchange purchases domestically from August 10 until the end of 2023, as a means to prevent the ruble from plummeting further.
However, this measure has not worked, at least for now, and the Ruble has fallen to 100 against the USD.
Late last month, Russian President Vladimir Putin signed amendments to the energy tax code that will reduce the discount of Russia's top Urals Brent crude to $20 a barrel from September from a $25 discount now. The changes will also halve subsidies to Russian refineries from September 2023 to the end of 2026. Already this move will reserve more resources for the Russian budget. The risk is that this reduces exports, so it can only work if Saudi Arabia keeps production low.
The halved subsidies to refineries will save the Russian budget $326 million (30 billion Russian rubles) in expenses a month, according to Finance Minister Anton Siluanov.
So the tax increase proposed by the Central Bank of Russia is the third leg needed for the rebalancing of the Russian State Fund in this military situation. A fourth leg could derive from the increase in exports against the acceptance of Western currencies, but this can only happen either with smuggling or with the sale of crude oil to third countries, such as India, which then export the refined product to the USA and Europe and therefore can pay in hard currency.
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The article The Russian Federation may be forced to raise taxes. Meanwhile the Ruble at 100 comes from Scenari Economici .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/la-federazione-russa-potrebbe-essere-costretta-ad-aumentare-le-tasse-nel-frattempo-il-rublo-a-quota-100/ on Mon, 14 Aug 2023 15:26:23 +0000.