Radik Gayzatullin: ‘I often ask: ‘What surplus? We don’t have it’’

Tatarstan’s treasury to return 400 million rubles to Sberbank

At a meeting of the Tatarstan State Council’s Committee for Budget, Taxes and Finance on 7 June, deputies calculated how the treasury was replenished amid the imposition of unprecedented economic sanctions against the country. Two related “financial” issues about budget performance of Tatarstan in 2021 and the first quarter of 2022 were formally on the agenda. It might seem to be a boring bureaucratic procedure that doesn’t arouse great interest. But this year the approval of the report cannot be considered a purely technical procedure, since the summary of financial results of 2021 almost coincided with the start of the special military operation in Ukraine.

As the republic’s Finance Minister Radik Gayzatullin explained to journalists, companies’ income indicators are traditionally announced in March, however, in 2022 they started to be reconsidered because of the difference in currency rates. For instance, as a result of correction of financial indicators, the republican budget will have to return the excess income tax.

“Now everything depends on income tax. It can be transferred now, while next month... We see in Sberbank, we have to return them over 400 million according to annual reports. They submitted the annual report in March but transferred tax duties last year. According to legislation, we have to return a part of this money,” the minister talked about the nuances of adopting the republican budget of 2021.

2021 budget had a surplus of 11,6 billion rubles

However, at the meeting, Chairman of the budget committee Leonid Yakunin tried to carefully avoid the topic of the beginning of the special military operation in Ukraine. He says that every year the budget faces different risks that have to be overcome on the fly.

“We just learnt how to work with the pandemic but were imposed Western sanctions. We cannot get relaxed,” he warned.

Delivering a report on Tatarstan’s budget performance for 2021, the finance minister called it surplus budget. According to his data, the budget received just 419 billion rubles, including federal money.

Its own tax incomes reached 366 billion rubles, which is 80 billion rubles more than in 2020. Non-refundable transfers totalled 75 billion rubles, including federal subsidies. Also, 982, billion rubles of personal income tax was collected.

“The year was stable, our enterprises worked well. There has been the biggest income tax transfer in the last 6-7 years,” Gayzatullin praised Tatarstan enterprises for the tense operation.

Budget expenditures totalled 343,6 billion rubles, while the surplus is 11,6 billion rubles. According to the Tatarstan finance minister, the republic received 22 billion rubles to balance the republican budget thanks to Tatarstan President Rustam Minnikhanov’s efforts. The road sphere that received “big money” for the first time was at an advantage too. Despite the hardships, all tax preferences stayed, stressed Gayzatullin.

Exporters back to last year’s figures

At the same time, the head of the finance ministry is concerned that the budget performance won’t have a surplus this year. According to him, 173 billion rubles were collected in the budget in five months, which keeps up with the plan. But there was a risk of not collecting it and was related to ups and down of the currency rate. The record weakening of the ruble in the last 20 years coincided with the beginning of the special military operation in Ukraine. The dollar rose from 77 to 120 rubles from 22 February to 10 March. After that, the ruble started to get stronger again. Within a month, it almost returned to the level in late February. As a result of the weaker ruble, large enterprises are constantly correcting the forecast.

“Tatneft and NKNK are backbone enterprises in the budget. As for NKNK. It has a big euro and dollar loans. In case the currency rate, the difference will lead to a lower income tax. Since the rate normalised, we see big companies made a specified forecast. It is close to what we talked about last year. If we had over 9 billion rubles factored in for NKNK, now we specified it to 7,8 billion rubles. Yes, it is anyway lower. And if we looked at it in March-April, it would be much lower, almost zero when the rate was equal to 120 rubles,” explained Gayzatullin.

After the ruble got stronger, the Ministry of Finance resumed the funding of all public programmes.

“If only primary costs were financed in the first quarter, all programme have started to be fully funded since April and May. We can say everything is going normally,” explained Gayzatullin.

Nevertheless, he urges the audience to count on a surplus in 2022.

“I often ask what surplus we have? We don’t have it. There is quite good performance that will allow meeting all budget commitments,” he said.

There must be guaranteed preferences

One of the deputies Alexander Komissarov drew the attention of the Tatarstan finance minister to the extension of the term of tax preferences for those who work in a simplified taxation system. Those employed in processing industries, production and distribution of electrical energy, gas and water as well as construction have 5% tax rate as support measure for the real sector of the economy. For the rest of taxpayers using such a special tax regime, the tax rate is lowered from the federal level of 15% to 10%.

“Every year we extend the validity term of the preferential rate for a year, for a year in fact. This is uncertainty for a business. It feels more comfortable if there is a guarantee of the conservation of the preferential rate for several years. Perhaps, should we make a preferential rate for several years for a newly created business in 2022?” Komissarov asked.

The head of the finance ministry promised to return to this issue later this year.

“The president has been making a decision on extending the validity of preferences since 2009. We have studied the experience of other regions. Many cancelled preferences in many sectors or reduced the list of users. We don’t reduce tax preferences,” he answered offering his colleague to launch the initiative in the future.