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Signs that Russia’s leadership may be ready for tax reform

Signs that Russia’s leadership may be ready for tax reform

MOSCOW:  In 2011, a group of Russian and foreign academics put together a long-term economic plan known as Strategy-2020 which emphasized investment in human capital and infrastructural development as a method to offset demographic decline and capital depreciation. At the same time, the plan proposed significant cuts of defense expenses and pension system reform. Disagreements over specific measures and new risks, particularly the rising protest activity of 2011-2012, eventually resulted in Strategy-2020 being shelved. But the proposal survived the following years and currently has a number of high-profile supporters, including the head of Central Bank of Russia Elvira Nabiullina. The idea is also championed by former finance minister Alexei Kudrin, who is considered to be one of the most prominent independent experts with direct access to highest echelons of power in Russia. In 2017, he published a report warning that any further delay of the budget reform will result in long-term stagnation of Russian economy. When asked about the reports about a possible budget refocus emerging in Russian media in mid-January, Putin’s press secretary Dmitry Peskov stressed that no final decision has been made yet. However, later comments by other major speakers, particularly by the finance minister Anton Siluanov, hinted that this time the government is determined to proceed with the maneuver. The exact way in which it will be implemented is still not entirely clear, though.The presidential election in March will open a window of opportunity for a possible budget maneuver. Whether the Kremlin would use it will depend a variety of factors, most importantly the outcome of the election. While there are no doubts about the name of the next president, there is a general understanding that the leadership is concerned about a decline in public support for Vladimir Putin. It might manifest itself in low voter turnout, which is likely to become the key metric for the upcoming election.