Compensation for fiscal maneuver for Belarus: at least a few years and package

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Компенсация за налоговый маневр для Беларуси: как минимум, через несколько лет и с пакет

Tax reform and the supply of substandard oil has slowed the pace of economic growth in Belarus. And if the Belarusian authorities in the near future will not be able to negotiate with Moscow on compensation of the losses incurred, forward-looking indicators in 2019 may fall.

GDP growth in Belarus, according to the basic parameters of the socio-economic development of the country in 2019, is planned at the level of 4%. Meanwhile, in January-may the growth rate of industrial production in Belarus amounted to only 0.3% compared to 1.2% in January-April. Very clearly slowed growth in the manufacturing industry up to 0.6% from 1.8% in January-April and mining to 1.2% against 3.3% at the end of April.

Belarusian refineries at the end of April and in may because of the dirty Russian oil had to dramatically reduce the volumes of oil refining. The result was the suspension of exports of petroleum products. In January-April, exports of petroleum products decreased by 17.3% to 3.8 million tons, in money terms — by 18.6% to 1.8 billion dollars in comparison with the same period of 2018. The may statistics will likely show an even greater fall of these indicators.

And yet the negative effect of dirty oil and, as a consequence, the suspension in April-may export of oil products to the Belarusian budget, I think, will be fine. The government also believe that these losses are temporary in nature. “They will be restored by restoring the volume of oil refining”, — said Finance Minister of Belarus Maxim Ermolovich, answering journalists ‘ questions on June 20.

The volume of oil refining in Belarus by the end of 2019 is planned at the level of 18 million tons. “We have a clear understanding of the fact that technologically these volumes can be restored in complete accordance with the original plan. This means that the revenue loss for the year overall will not” — said the Minister.

According to the government of Belarus in April-June of 2019, the Belarusian oil refineries less 650 thousand tons of oil from Russia. In full net Russian oil Belarusian oil refineries have started to 4 July.

Presumably, in the coming months, the Russian “Transneft” will try to increase the volume of pumping oil to Belarus, to the end of the year to fulfill obligations to the Belarusian refineries. This will allow the company, through the fault of which had an emergency on the pipeline “Friendship”, to minimize the financial Belarus ‘ payments to compensate for damage. It is no coincidence that the first Deputy head of RF government staff Sergey Prikhodko told journalists recently that the actual amount of compensation to Belarus for the supply of contaminated oil will be determined after 2019 — “based on actual volumes of oil supplies to Belarus and its transit via Belarusian territory”.

Due to the tax maneuver of the Belarusian economy over 5 months, lost $ 130 million

But the losses from the tax maneuver in the oil industry of the Russian Federation Belarus this year is unlikely to get.

Meanwhile, the world Bank’s updated economic Outlook for Belarus is directly linked to economic growth in the country with the consequences of the implementation of the tax maneuver. “Even such a modest forecast (1.8% in 2019) depends on the partial — at least at 50% — compensation of losses from held in Russia, the so-called tax maneuver”, — noted the experts of the world Bank.

The IMF expects losses of Belarus from the tax maneuver in the Russian Federation in the amount of 5% of GDP until 2024, said senior IMF resident representative in the region of Central, Eastern and South-Eastern Europe Nadeem Ilahi during the conference, Fitch Raitings 9 July. (In 2018, the GDP of Belarus amounted to 59.4 billion dollars by 2025, according to the plans of the Belarusian authorities, GDP is expected to grow to $ 100 billion).

Belarus from 1 January 2019 within the framework of tax reform in the Russian oil industry was forced after Russia almost a third to reduce export duties on oil and oil products. As a result, in the first quarter of 2019, the Republican budget revenues from export duties on petroleum products decreased by 28.3% compared to the same period of 2018 to 334,5 million.

According to estimates concern “Belneftekhim”, in January-may, the Belarusian economy has lost from the tax maneuver in the oil industry about $ 130 million, reported by Deputy Chairman of the group of Svetlana Gurina journal “Bulletin of Belneftekhim”. Earlier, government officials had previously estimated losses from the tax maneuver in 2019 to $ 400 million, and for the entire period of implementation of the tax maneuver in the 2019-2024 years — more than 10 billion dollars.

Belarusian Ambassador to Russia: “We will not be able to survive a tax maneuver”

Negotiations with the government of the Russian Federation on compensation of costs for the implementation of the tax maneuver, the Belarusian side does not stop from last year.

Earlier, the Ambassador of Belarus to Russia Vladimir Semashko said in an interview with TV channel “Russia 24”, said optimistically that the government of the Russian Federation there is an understanding of the problems of Belarus, and the parties have started discussion of compensation mechanisms. And even called these mechanisms. According to him, they can be in the form of intergovernmental transfers, changes in formula prices of oil, as well as making this formula special discounts. The amount of compensation disputes also seemed to be no. “The size of compensation is obvious for both sides: should be compensated for the difference in export duties, multiplied by the volume of the exported oil,” — said V. Semashko.

However, in early July in interview “to Komsomol truth” Vladimir Semashko said the Belarusian side had sent its proposals on mechanisms of compensation for fiscal maneuver, as well as the price of gas at the energy Ministry, Gazprom, the Russian government, “he proposed different methods, but have not yet received any official opinion.” The Belarusian Ambassador said that it is a violation of the Treaty on the Eurasian economic Union (EEU).

He did not agree that the tax maneuver Russia’s internal affair, and stressed that the EEU should be ensured a “mutually beneficial cooperation, equality and national interests of the parties.”

“We were four years ago bought oil for the same price as Russian refineries. And now we bring to the world. An everyday example. Should I buy oil at the world price, Refine it, fill the tractor, car, combine, to sow, to harvest, to release a product, and then duty free to put it at a low price to the market of Russia and the Eurasian Union. That is a loss,” said the Ambassador.

According to him, the Russian budget, which is largely generated through the sale of oil and products of its processing, can afford the tax maneuver and even to profit from it. “Russian oil refineries is not enough — get compensation. We have no oil. In Belarus, the maneuver deals double blow — and the oil refining industry, and budget. We’ve already lost 3.6 billion dollars, and could lose another 10 billion”, — said Vladimir Semashko.

Continuing this theme in an interview with Russia 24, Vladimir Semashko noted that the costs of the second phase of the tax maneuver “too heavy” for Belarus. “Russian refineries would buy the oil somewhere around 83-84% of the world price. We will buy at the world price. And what is this benefit? In order for the refinery to work properly, took out loans, serviced them, modernized, 4-5%. And here is 16-17%. And we can’t have it. Therefore, we will not be able to survive tax reform,” said the Ambassador.

Compensation for tax maneuver “tied” to the creation of a common energy market in EEU

Despite this desperate for ally the situation, Moscow is in no hurry with this issue. The Kremlin last year has made it clear: now all compensatory mechanisms for Belarus to be considered in conjunction with the deepening of integration processes within the Union state.

Prime Minister Dmitry Medvedev in December 2018, said that Russia is ready to continue to move forward with the construction of the Union state in the manner provided for by the Treaty establishing the Union state of 8 December 1999 in accordance with which the Russian Federation and Belarus should be a single currency, a single court, the unified customs etc.

Following this, during a meeting of the presidents of Belarus and Russia on 25 December 2018, an agreement was reached on creating a Russian-Belarusian working group for the development of the enriched curriculum integration. And after the meeting Alexander Lukashenko and Vladimir Putin on may 29 at the summit of the EAEC governments of the two countries was instructed to study and verify counter-action plans on key areas of integration up to June 21.

During the St. Petersburg international economic forum June 8 talks of the heads of the working group on the development of the integration of the two countries, economy Minister of Belarus Dmitry Cool with the Minister of economic development of Russia Maxim Oreshkin. D. Steep told reporters that the working group should present the Prime Ministers and the presidents of the two countries “renewed programme of deepening integration between Belarus and Russia.” It includes “different activities with different periods”, mostly the horizon to 2022-2023 years. He noted that the unification of the two countries discussed in the program is not, it is about economic and financial convergence.

During the forum D. Cool also said that Belarus hopes to agree with Russia on compensation of losses from the tax maneuver in the negotiations on integration in the energy sector. According to him, the issue of compensation from the tax maneuver takes place in the context of formation of common markets of gas, oil, petroleum products and electricity market. “Three segments of the energy market, and only in the complex will be considered including compensation for the tax maneuver,” — said D. Cool.

This may mean that next year Belarus can hardly expect to be compensated for the tax maneuver as to create a common energy markets in the EEU envisages by 2025.

What comes first: equal conditions or deeper integration?

This time is absolutely obvious that to expedite a solution to this urgent for Belarus issue will be the presidents, who previously had managed to find a way out of seemingly impasse in bilateral relations.

Prime Minister Dmitry Medvedev during the meeting with Alexander Lukashenko on June 21 noted that the government studies on the integration of the two countries can convey to the presidency in July, during VI forum of regions of Belarus and Russia, which will take place July 16-18 in St. Petersburg, and roadmap for the implementation of initiatives in the field of Federal integration can be signed in November 2019.

However, A. Lukashenka at the meeting with Union state Secretary Grigory Rapota on 9 July, said the lack of concrete results in the work of the Belarusian-Russian intergovernmental working group on integration.

“It’s been so many negotiations, and here I am now reporting… promises, promises. The negotiating team met with a question — the Russian government promises to give, including Prime Minister Medvedev, all commands, orders, in order to solve complex issues. Because defined negotiating tactics: promised — forgot, the second time I promised — I forgot. That is, there is a strange inhibition of these processes. And why I am so publicly speak about it. Because it is already “tomorrow” for us to meet with President Putin in St. Petersburg. And to discuss the outcome of these negotiations. And there is nothing to discuss today. So I would ask you to take control and initiate to put tough questions to the Russian side that we should have a few days to reach some conclusions. So we can develop the agenda and to discuss these issues with President Putin on July 17-18 in St. Petersburg. Just to meet and sit with each other, nothing to say, it’s probably already gone,” — said Alexander Lukashenko.

According to him, the Union state all the emphasis today has shifted to the top and once again many of the issues is scheduled to be at the presidential level. “We need to solve the current issues that we have with Russia a lot. For example, today we have about 80 enterprises closed down by the Rosselkhoznadzor or any authority in Russia, and maybe the government. Most likely, the government. Closed to supply our products to Russia. Moreover under false pretenses. For example, such a question. If we have each other today, build relationships, listen to common currency and the accession or Association of States can say… it Should be clear. This just shouldn’t be in the relations between the two countries,” — said Lukashenko.

He also spoke on access to government contracts. “Everyone should be equal. And enterprises of Russia and Belarus”, — he said.

“Or industrial cooperation, about which we talk a lot. Or tax maneuver, which tossed instead of customs duties, we agreed that they are generally in the EEU should not be. Not that in the Union state. Or has actually expired deadlines in the negotiations on supplies of natural gas and oil for the future. A lot of questions. Which are not solved. And we agreed that addressing the strategic questions we will address issues of tactical nature, which lie on the surface. Because without addressing these issues and to talk about, from our side. There are many problems,” — said Alexander Lukashenko.

It is obvious that at the stage of signing the roadmap for deeper integration, the allies may face an insurmountable contradiction: Russia now insists on a deeper and fast integration within the Union state, after which it is ready to make concessions to the ally and the price of gas, and to compensate for the losses from the tax maneuver, etc., and the Belarusian side is convinced that without equalizing the economic conditions of talk about deeper integration in General is pointless.

 

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