chapter  2
18 Pages

The State of Public Finance, Fiscal Policy, and the Budget in Russia

WithSergei Stnelnikov

The Soviet system of public finance had two stable, primary sources of budget revenue: deductions from corporate profits and a turnover tax. State spending steadily increased, however, and by 1990 the state's financial situation had worsened dramatically. The urgent financial situation, combined with the increasing slump in production and foreign trade, determined the need for immediate economic reform in Russia. The original budget estimates for the first quarter of 1992 provided for balanced revenues and expenditures through drastic spending cuts, primarily in the national economy and defense. The amount of real revenue from corporate profits was influenced by both tax remissions and the rate of wage growth as compared with changes in renumeration in prime cost regulated by the legislature. The state also succeeded to a considerable degree in battling the centrifugal budgetary tendencies of a number of regions of the Russian Federation.