Putin Puts USD90bn Stimulus To Russian Duma

by Tatiana Smolenskaya, Tax-News.com, Moscow

10 April 2009

Russian Prime Minister Vladimir Putin has introduced a RUB3tn (USD90bn) package of stimulus measures to the Duma to help the economy through a “very hard” year. The package includes tax breaks and the shelving of proposed tax increases, especially the 8% rise in social security taxes, increased welfare benefits for mothers and the elderly, and increased defence and infrastructure spending plus additional support for commercial banks.

The three-year budget approved last year was discarded and the 2009 spending plans have been abandoned to counteract the first downturn in a decade. RUB5tn (USD 150bn) in emergency funding has already been committed since September to cope with the country’s financial crisis.

A sovereign wealth fund holding windfall oil revenue is being applied to the expected budget deficit of RUB3tn (USD 90bn). This deficit, equal in size to the stimulus package, represents 7.4% of projected gross domestic product.

Last October it was decided to raise social security taxes levied on business by as much as 8% in 2010. Businesses currently pay a unified social tax on employees' salaries mainly for pensions. Plans to increase the charges by about RUB1tn (USD 30bn) a year by converting the current tax into three separate levies as high as 34% of salary have been shelved another year to 2011 after stiff resistance from business.

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