Russia's Stabilisation Fund Should Be Used To Meet Tax Shortfall, Says Business Leader

by Tatiana Smolenskaya, Tax-News.com, Moscow

10 November 2005

The president of the Russian Union of Industrialists and Entrepreneurs told a tax forum on Wednesday that he is in favour of using money contained in Russia's Stabilisation Fund in order to offset a revenue shortfall brought about by recent tax reforms.

Alexander Shokhin told the Second All-Russia Tax Forum, Business and State Tax Policy that it would be "quite appropriate" for the Stabilisation Fund to be used in this manner, RIA Novosoti reported.

He added that the government has made good progress in bringing the tax system into line with accepted international standards, although he urged the authorities to adopt a more harmonious approach towards taxpayers with its enforcement activities.

Established on January 1, 2004, the Stabilisation Fund absorbs revenue from oil export sales when oil prices exceed a certain threshold, currently $27 per barrel.

According to the World Bank, the Fund, which currently contains $38.3 billion, may exceed $52.5 billion by the end of 2005 if oil prices remain above $60 per barrel.

Meanwhile, Finance Minister Alexei Kudrin has mooted the idea of using the Stabilisation Fund reserves to pay for future pension provision and prevent the need for higher taxes.

"Spending this money would be harmful because it is not backed up by anything. In the future, when the economy is growing, this money could save a whole generation," Kudrin stated in an interview published in the government's Rossiiskaya Gazeta on Monday.

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