The Legislative Duma of Tomsk Oblast
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October 30, 2014. Address by Oksana Kozlovskaya at the 35th Session of the Legislative Duma of Tomsk Oblast
A high level summary of October 2014 results presents the following highlights.
- President of Russia Vladimir Putin delivered a keynote speech at the Valdai forum in Sochi where he described the existing world order as a collapse of international law, suggested not ignoring the new power center in the East and starting to look for new ways of cooperation between nations and joint management of risks
- Ukraine held difficult elections to its parliament, Verkhovna Rada, which finalized the process of shaping up Ukraine’s political institutions
- CEO of French oil giant Total died in a jet crash at Moscow Vnukovo Airport
- And, of course, Russia’s 2015-2017 budget based on cheap oil, economic sanctions and Crimea’s integration with Russia. It is common knowledge that Russia’s budget revenues are for the most part shaped by its oil and gas industry. Currently, the oil prices are upsettingly low – at their 2014 minimum. The Ministry of Finance has estimated that every dollar lost in the price of oil costs the federal budget 70 billion rubles. At the same time, the Federation gains a significant income through the devaluation of the ruble. With each ruble yielded to the US dollar, the federal budget gains almost 200 billion rubles. The regions do not have such opportunities. For Tomsk Oblast, falling oil prices are the biggest risk because the region’s oil and gas industry has always been the largest contributor to the regional budget – up to 70% of all revenues.
For instance, over the last 10 years the budget of Tomsk Oblast had been growing mostly through growing oil prices which provided more profit tax from the region’s oil and gas industry. In 2004, a barrel of oil cost 34 US dollars. In 2007, 69 US dollars. In 2012, 111 US dollars. Global oil price projections for 2015-2017 vary widely, from 60 to 100 US dollars per barrel.
Most experts believe that the collapse in oil prices is the result of a conspiracy of OPEC and the US against Russia, Iran, and Venezuela. And things are unlikely to change soon in the oil market. The Russian Audit Chamber has also warned that the oil prices in the national budget are the most concerning risk.
Another risk is declining credit ratings of Russia and its 12 biggest regions, including Moscow, Tatarstan, Krasnoyarsk, and St. Petersburg. The worsening credit ratings significantly impair access to cheap loans both for the government at all levels and the business. This year, the federal budget has borrowed money at 10% interest rate. Compare this with 6-7% in the previous years.
The economic slowdown inevitably impacts incomes and consumer demand. A national opinion poll has shown that 7% of Russians have already stopped taking loans, buying insurance, and keeping money in banks. 20% are considering doing so soon.
Given the above, the Russian Government submitted the federal budget for the first reading as “tight but balanced”.
It takes into account all social commitments, including those dictated by Presidential Decrees.
At the same time, the Government has not resorted to increasing tax rates for business. Instead, it proposed an action plan to stimulate business. The federal budget also includes a number of actions to support regions.
For example:
- Tax holidays for sole proprietors and tax benefits for manufacturing start-ups
- Export incentives
- Compensation of costs for regions for setting up industrial parks (starting in 2016)
- Tax preferences for residents of zones of advanced economic growth
- Substitution of expensive commercial loans with public budget loans (0.1% interest) provided that the borrower meets a number of tough conditions by the Ministry of Finance
- Co-financing funds to meet the requirements set forth in Presidential Decrees
The Government has set the following budgeting tasks before the regions.
- Adjust the salary increase trend for public sector workers to reflect the approved roadmaps
- Balanced approach to borrowings in terms of amounts and structure
- Create conditions for investments and substitution of imports
- Efficiency of social spending.
The main subject item on the agenda today is the law on the Oblast budget for 2015-2017.
Together with the Governor, we have already had a preliminary review of the three years’ budget and discussed many pertinent issues.
Most important about the 2015-2017 budget is the fact that it is balanced, guarantees delivery on all social commitments and secures investments in development initiatives.
This budget is unique in utilizing a program oriented approach to 95% of all spending. Key features:
- This budget provides an increase in payrolls of state financed organizations by almost 2bn rubles, with total spending of 23.5bn rubles (over 40% of the consolidated expenditures)
- The budget also includes increased spending on healthcare – more than by 1bn rubles. Overall spending on healthcare and education totals 23bn rubles. You must admit that with the rate of spending so high, the quality of services and efficiency of spending should be no less high.
- 2.6bn rubles will be spent to build, maintain and repair roads.
- 1.3bn rubles will be allocated to develop rural areas and upgrade agriculture.
- A third of all spending will be used to support municipal entities.
- 14% of all expenditure will be allocated to develop the real sector and provide investments.
Still, the Conciliation Committee which will be elected today will have to work hard together with the Oblast Administration to look for additional revenue opportunities and find solutions to the most pressing problems.
Revenues will be the focus of our attention. We should not be relaxed about increasing numbers of loss-making companies in the region, and ‘under-the-table’ wages. What is more important, we are observing a growth of high technology production in the region, and increasingly more well-paid jobs. For several years already the revenues of the regional budget have been largely shaped by the personal income tax. Here, the INOTomsk project comes to the spotlight as it focuses on the academic and innovative potential of the region.
Please note here that Tomsk students not only provide a quality bench strength to the region but also invest in the economy of Tomsk Oblast bringing to the regional budget more than 6 billion rubles annually.
Agriculture is demonstrating growth. In 2014 only, revenues from agricultural taxes increased by 11%.
More revenue will be secured through support for investment projects in petrochemical, nuclear, and forest industries. All this is yet more proof of the efficiency of the governmental support for the companies, key growth points.
The full agenda consists of 41 items.
