21 February 2018, Wednesday, 9:48

Motorists Involved in Ponzi Scheme


Why are gasoline prices constantly rising in Belarus?

On Thursday, January 11, the representative of the Belneftekhim stated that prices should be raised by 23% at filling stations to compensate for oil price increase.

In last August-December oil prices increased by 25.8%. Why did the price remain the same when oil price drop on the world market during previous several years? Barys Zhaliba, Doctor of Economic Sciences, answers the question of the Charter97.org:

- Frankly speaking, Belarusian filling stations ignored the prolonged oil price drop on the world market. The reason is a "specific" structure of Belarisian oil and diesel fuel pricing. The major part consists of indirect taxes - VAT and excise duties.

The sum of indirect taxes far exceeds the cost of a ton of gasoline. Therefore, amid world oil price decline, gasoline cost less in developed market countries. After all, the number of indirect taxes is less there.

We have never had the same. To collect taxes is the main objective of the state. Taxes, VAT, excises are its favorite "magic" formulas, instruments to perform the fiscal function, "gratuitous" withdrawal of funds to the budget.

So fluctuations of the world oil prices do not play any role for Belarusian motorists.

- What sums were raised on fuel excise in the period of low oil prices? What is their share in the state budget?

- It's hard to answer this question. No official data on the matter is published. These figures are not indicated. One should get an access to familiarize oneself with them. But other thing should be paid attention to: VAT takes the first position among deductions to the budget. Excises follow it; sometimes they take either the second or the third position, falling behind customs duties.

And this budget structure is economically deleterious. It is considered a negative symptom if indirect taxes make up the lion's share of the state budget. In the developed countries, the lion's share of the budget is made up by taxes on profit of enterprises and companies, taxes on high salaries and their growth, and so on. On everything that makes up the economic activity of the society.

The major part of our budget is "passively" formed, as it was in the pre-industrialised times.

- It turns out that during the time of low prices for oil, the budget, all the same, gained huge profit because of high indirct taxes. But that was the period when people's real income dropped, the gap in the NFFS emerged, the retirement age increased, the tax on "spongers" was invented... Where are petrodollars from the budget then?

- There is a good and in-depth definition: the oil curse. It is more typical for oil-producing countries such as Russia or Venezuela. But it can be applicable to Belarus as well. Since the Soviet times, the economy - both Russian and Belarusian - has raised huge income on the world oil prices. Unlike many Arab oil countries – Saudi Arabia, the UAE – who used oil to enhance their economic power and the standard of living, Russia, Venezuela and Belarus failed with it.

- Why did it happen?

- Because, as they say, "petrodollars" are wasted. The Reserve Fund of Russia has recently been "eaten away". "Eating-away" is a direct consequence of unreformed poor economy.

As for Belarus, the country has been recently living on ordinary Ponzi scheme. The authorities have created the system that they have to constantly pay out the debts they incurred. Therefore, any free funds are spent on debt repayment, but it is not enough.

From year to year the government lives in hope of other refinancing of the onerous public debt.

- It resembles the MMM (the largest Ponzi scheme) of the 90s...

- Yes, it does. The state of the economy is constantly dissatisfying and does not allow to "save a bit", to say nothing of funds spent on social needs. The government takes care only of the "financial pyramid" to stay. in the current year it has to repay debts and to come up with a source to repay it next year. And this debt pyramid is being constantly refinanced. Now escalating prices for gasoline and diesel fuel will contribute to it.

- Will the prices for them be really increased by 23%? After all, the growth of world crude oil prices has already made 25.8%, and there are costs for delivery, processing, distribution of fuel. In addition, since January 1 Russia has increased the excise tax rate by 10-12%. What is the final figure of the oil price increase?

- Voiced 23% can be just the beginning. Only the duration of the process is questionable. Belneftekhim needs additional money both for compensation of oil price growth and its internal needs. After all, there should be some reserves for reconstruction and development.

Russia now performs the tax maneuver; it raises the tax on crude oil production. As a result, Russian raw materials will cost more for Belneftekhim and Belarusian refineries.

23-25% price increase is required only to cover the rise in world prices. The Russian tax maneuver ought to be taken into consideration, as well as the factor of the Belarusian oil industry. But it's a risky move to increase prices by more than 23-25%. I guess that Belneftekhim will use tried-and-true methods and will practice small but frequent price increase.

anyway, motorists should monitor prices at filling stations. The logic of the authorities is as follows: if you drive a car, it means you are not the poorest person and you can still give something. Therefore, Belneftekhim will exert pressure on the government to raise prices. They say, people will continue driving cars...

- Is the government strong enough to follow the "small-price-increase" method? After all, sooner or later it can face some new unexpected factors. And it will have to turn to a sharp price increase, as it is stated now...

- Yes, it's possible. For a long time, the prices of gasoline in Belarus were almost the lowest compared to our neighbors. Therefore, it is easy for Belneftekhim to demand their sudden increase to allegedly level the prices.

The situation can follow the scenario when we face a sharp price increase. As it happened last week, when Belneftekhim walked in on motorists with 23%.

Of course, it will cause discontent. Many of us still remember protest actions "Stop Petrol" in 2011. Cars blocked the traffic on Nezalezhnastsi Avenue.