What Will Grow in Price After Oil Failure of Lukashenka?

The economist's prediction.

Head of the State Customs Committee Yury Senko said after the report of Lukashenka that VAT, excise tax, import customs duties paid by individuals (!) will compensate for oil losses.

The chief customs officer added that this experience had already been "successfully" applied in 2019: "This was worked out for every penny to get to the state budget. The work is ongoing, similar tasks are set for the current year," he said.

What does it mean for Belarusian citizens? Economist Leu Marholin answers the questions of Charter97.org.

- How can one compensate for oil losses at the expense of VAT? Does it mean that the tax can be increased and what can it lead to in the current economic situation?

- This is, in fact, Lukashenka's favourite toy, which is called "asymmetric answer". That is: Russia hits it, he will hit his citizens.

I think that the head of the Customs Committee was referring to the import VAT. It's likely that the number of privileged positions, on which VAT was not paid or was paid in reduced amounts, will be reduced. Excise duties on goods imported into the country may be expanded or increased. Thus it will somehow make it possible to reduce budget losses from the tax manoeuvre. It is just a matter of somehow compensating for the budget revenues lost.

- What does the authorities' interest in the rate of excises and import customs duties paid by individuals mean?

- As for excise taxes, they are likely to rise. Excisable goods are primarily luxury goods and alcohol. Their assortment will be expanded, adding something that was not previously subject to excise duties.

Excise taxes are, as a rule, either what is "harmful to health" or what is intended for the middle class, for relatively rich people. That is, it's a way to impose additional taxation on those who consume luxury goods.

There are two options: excise rates can be increased and the range of goods that are subject to excise tax can be expanded.

As for the import VAT, I do not think that the rate will be raised. Then it will affect many items, a lot of consumer goods. I think that it will regard the privileged positions on which the import VAT was either not paid at all or was paid at reduced rates.

- What other methods can the authorities use to compensate for their losses from the Russian tax manoeuvre? Could there be any ideas of a 100-dollar duty for traveling abroad again?

- I think the introduction of a $100 tax on traveling abroad may cause social unrest.

When forecasting measures to replenish the budget, I would not focus on the experience. Everything we had before, except for the wrong things, already exists today.

I think that some new steps are likely to be taken to somehow compensate for the tax manoeuvres. I think that we have creative people in such matters. First of all, the price of gasoline for retail customers will rise. It may rise by 2 or 3 kopecks a week. They will come up with new things we can hardly even imagine today.

- How much do you think the Belarusian budget may lose in 2020 from oil and gas problems with Russia?

- It's a matter of mathematics. And as far as I know, people have already calculated how much we lost in 2019, how much we will lose in 2020, how much we will lose until 2024.

As for compensations, one cannot compensate all 100% exactly by some kind of increase or expansion of taxes.

Perhaps there will be some other attempts. Lukashenka periodically carries out "pumping" of his foreign policy and diplomatic missions t oimpose that the expansion of exports is task No.1.

The work will be carried out on all fronts. But it is barely fruitful, because everything has already been done. One can hardly expect any radical increase in currency revenues.

- You say that motor fuel prices can rise faster. What else can grow in price in Belarus?

- First, if fuel and lubricants become more expensive, it will affect the cost of other goods. There are no goods - neither imported nor domestic - that do not include the transport component. Therefore, it guarantees the price increase.

As for other goods, it is hard to predict. The fact is that we have few goods with regulated prices.

First of all, we can expect a rapid rise in prices for services - something that is regulated by the state. Domestic excise duties may grow. Not only on imports, but also on domestically produced goods - alcohol and tobacco.

- What other consequences can the oil and gas war have for the Belarusian economy?

- There is one consequence it all leads to. This is stagnation of the Belarusian economy. The worst thing that can happen is the shrinking of the economy. That is, instead of growth, there will be a decline in production. It may happen.

The world experience shows that both stagnation and economic shrinking may last for years. The experience of many Latin American countries, particularly Venezuela, and African countries shows that. The major thing is that when an economy cannot stay afloat, it slowly slides down.

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