Valentina Matviyenko: “Benefits are state investments, not incentives for the chosen few”

The speaker of the Federation Council responded to petitions about tax concessions and criticism of intergovernmental relations of regions with Moscow

Valentina Matviyenko: “Benefits are state investments, not incentives for the chosen few” Photo: stolica-s.su

“Stop embarrassing Mordovia, Kostroma and Khakassia for their debts approaching other regions' annual budgets across the country. Khakassia makes a profit of 250 billion rubles and leaves 21 billion in the budget. Enough!” speaker of the Khakassian parliament Vladimir Shtygashev was indignant at parliamentary hearings in the Federation Council and criticised intergovernmental relationships of regions with the federal central. Leaders of 80 Russian regions arrived in Moscow to annual budget-related hearings chaired by Valentina Matviyenko. Read what the extension of state budget restructuring through 2029 promises Tatarstan, what financial obligations the federal budget will take as compensation for shortfalls in incomes due to the cancellation of tax on movables and how the speaker of the Federation Council reacted to Khakassia’s attacks in Realnoe Vremya’s report.

We will cross five regions out of federal programmes

The major financial document of the country — federal budget for 2020-2022 — was subject to soft and careful criticism of regional representatives who arrived on Valentina Matviyenko’s request for traditional parliamentary hearings in the Federation Council on 4 October.

Welcoming the honourable audience, she said that the hall hosted 285 people, representatives of 80 regions of the country who occupied seats even in the hall’s balcony.

“It is a full house. And those five regions that haven’t arrived can pay through the nose for their imprudence. Let’s see who of these five regions didn’t manage to arrive, who isn’t interested and cross them out of federal development programmes,” she threatened but the audience decided not to name the skivers, they had mercy at the beginning of the next political season.

Tatarstan, by the way, was represented by a parliamentary delegation that included head of the budget committee Leonid Yakunin.

Tatarstan was represented by a parliamentary delegation that included head of the budget committee Leonid Yakunin. Photo: council.gov.ru

About orphans: “Ask yourself where they live”

Opening the hearings, Valentina Matviyenko stressed that the major financial document of the country is Russia’s development tool, the regions play an important role, and its economic blossom depends on their success. And we should say that the regional representatives saw first-hand during further heated debates that it wasn’t empty words and not Matviyenko’s go-to phrase.

The Federation Council’s speaker indeed stuck to a course of the protection of regions’ interests having allowed to express the habitual Moscow reproach just at the end of the three-hour meeting that the regions should not only ask for subsidies and help in the Russian Ministry of Finance all the time but also “augment profits”, and there is room for it.

Against the backdrop of impenetrable and silent Minister of Finance Anton Siluanov, the upper chamber’s speaker looked like a “humane politician” who instructed the Ministry of Finance to additionally allocate 4 billion rubles for the reconstruction of 30 children’s theatres in the country many times or when she was delivering an emotional speech about orphans who can’t be provided with houses after they leave orphanages.

“Yes, ask yourself where they live. Do they become homeless people? We must close this topic systematically this year!” she urged Anton Siluanov to be responsible persuading him that the regions couldn’t handle this load on their own.

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Anton Siluanov said that the extension of the term given to restructure budget debts to 2029 was under discussion. In other words, regions are given postponement for another 10 years but on the condition that profits don’t have to reduce, and the paid off money will be reinvested in investment projects. Photo: council.gov.ru

Regions’ debt payoff postponed to 2029

Before the speech of the invited Russian finance minister, Valentina Matviyenko enumerated the most vulnerable links in the construction of the major financial document, and here one could see her desire to help the regions do the best to replenish their budgets.

“The problem of regional budget balance draws the attention,” she noted having urged the financial agencies to think about a fairer system distributing transfers to subsidised regions. “Mr Siluanov, it seems that you are cool about the concept of model budget when distributing subsidies to regions considering their profits.”

Matviyenko immediately switched to the problem of the regions’ debts, which, according to her, total 2 trillion rubles. Despite restructuring budget debts, debts of 18 regions continue growing, moreover, next year these regions will have to give from 1 to 3 billion rubles back, the FC’s speaker noted. Having noted that the audience stopped breathing in the hall, Matviyenko offered to soften the payback regime “so that we won’t leave regional budgets without money” and send it for development.

In answer to the question that was raised this way, Anton Siluanov said that the extension of the term given to restructure budget debts to 2029 was under discussion. In other words, regions are given postponement for another 10 years but on the condition that profits don’t have to reduce, and the paid off money will be reinvested in investment projects. It should be reminded that Tatarstan’s public debt as of 1 September 2018 was 94,9 billion rubles, 84,9 billion rubles of the sum are loans from the federal budget. It is clear that the regions welcomed this initiative, but head of Tver Oblast Golubev saw that the golden dream might not become a reality because of the new rules on the definition of tax profit of regions issued in the August decree of the Russian government No. 1099:

“In 2018, our profits will increase by 12,6%, but we can be below the level of 2018 this year because of high income base. It can’t be foundation to deny the extension of the restructuring term,” he insisted.

The regions were pleased with the fact that they would have shortfalls in income compensated because of the cancellation of tax on movables. Photo: council.gov.ru

Unjustified benefits for businesses

However, the regions were pleased with the fact that they would have shortfalls in income compensated because of the cancellation of tax on movables. As it is known, Tatarstan annually loses about 18 billion rubles because large businesses stop paying income tax at 2,2%, which is imposed on machinery and equipment for an upgrade. Anton Siluanov considers this measure justified, otherwise businesses will stop upgrading.

“The governor of Saint Petersburg wrote to me that the budget lost 13,5 billion,” Matviyenko noted in this respect. “We liberated all movables and fail to understand ourselves why. Order needs to be put,” she required.

She doesn’t see the results of benefits for oil companies. Despite almost a twofold rise in tax concessions in the last five years made to oil companies, there is “neither growth of investments nor reduction of the sector’s dependence on supplies of imported equipment” in Russia, the chairwoman of the Federation Council claimed. According to her, the benefits must be provided only if there is real feedback.

“As for tax concessions, they must be made only when there is real feedback. Concessions are investments of the state, not preferences for the few, which often happens in practice,” the Federation Council’s speaker stressed.

Integrated tax inspection in all enterprises awaits Khakassia

Regardless of the promised postponement of budget debts for another 10 years, the accumulated debts concerned the regions. The Federation Council’s speaker admitted that the regions had different economic development, and federal ministers had to pull those falling behind. They are responsible for 10 economically underperforming regions out of 85. Valentina Matviyenko asked the finance minister who he was responsible for. “Transbaikal and Kurgan Oblast,” he replied. In answer to it, Mrs Matviyenko said ironically what blossom should be expected.

“Khakassia makes a profit of 250 billion rubles but leaves 21 billion in its budget. Enough!” he exclaimed with annoyance. Photo: gazeta19.ru

“Mordovia, Kostroma, Khakassia… These regions are often named in this hall because their debts equalised with regions’ annual budget,” speaker of the parliament of Khakassia Vladimir Shtygashev took the microphone. “Stop embarrassing these regions across the country! Khakassia makes a profit of 250 billion rubles but leaves 21 billion in its budget. Enough!” he exclaimed with annoyance.

The speaker of the parliament decided to “open everyone’s eyes” and explain the reason for the low budget. According to him, large industrial enterprises of the region, which could replenish the treasury, “pay like small breweries” because they are part of the so-called consolidated groups of taxpayers. “The Sayano-Shushenskaya Dam works as 22 Dnieper Hydroelectric Stations but pays as a brewery. We produce 30 million tonnes of coal annually, but coal companies pay even less than the brewery leaving a “lunar landscape,” he couldn’t stop because of excitement. By his estimate, the budget loses 10-15 billion rubles from using the consolidated groups of taxpayers.

Valentina Matviyenko’s reaction was harsh. In conclusion, she asked the vice director of the Federal Tax Service to stand up and charged him with conducting a full-fledged tax inspection of all taxpayers in Khakassia: “We need to find out what’s happening to taxes in the region and verify the speaker’s words,” she gave a task.

20 billion for industry for the whole country?

The Federal Industry Development Fund will be honoured with another integrated inspection at the Federation Council’s instruction. Valentina Matviyenko asked its officials to reply: “Why will the fund get just 2,5 billion rubles from the federal budget next year?”.

“Is it enough for the whole country?” she was surprised.

Head of the fund Roman Petrutsa explained that the fund’s capital totalled 100 billion rubles, but 20 billion rubles went back to the fund’s basket from borrowers. “We are reaching self-financing,” the director of the fund boasted.

Roman Petrutsa: “We are offered 100-200 billion rubles, but the country doesn’t have so many projects”. Photo: iz.ru

“Just 20 billion rubles for the whole country? Do you know how industrialists would call you?” she reproached him.

But he calmly explained that there is simply no demand for big investments from the industry. “We are offered 100-200 billion rubles, but the country doesn’t have so many projects,” he claimed. Valentina Matviyenko was shocked, but not at the absence of demand but the fund’s director’s passivity.

“You have a passive position of observer and wait for somebody to bring you a project. It is you who must organise projects and then help with money,” she criticised his approaches. “You wait for the most ambitious one, we have an opaque loan distribution system. And unless you raise your ambitions nobody needs this microscopic fund with 20 billion.”

Having made an emotional remark, Matviyenko immediately instructed to inspect the fund’s activity in the last two years.

By Luiza Ignatyeva