MINISTRY OF SCIENCE AND HIGHER EDUCATION OF THE RUSSIAN
FEDERATION
THE PLEKHANOV RUSSIAN UNIVERSITY OF ECONOMICS
INTERNATIONAL BUSINESS SCHOOL
IBS – PLEKHANOV
DEPARTAMENT OF ECONOMIC THEORY
Course paper of Macroeconomics
“Fiscal policy in Russia: current aims and effectiveness”
Student: Shaptefrats A.V.
Group: 5101
Supervisor: senior
lecturer Khodzha K.
Moscow
2021
Contents
Introduction ............................................................................................................ 3
Chapter 1. The essence of the fiscal policy ............................................................. 5
§ 1. Fiscal policy instruments and their impact ....................................................... 6
§ 2. Types of fiscal policy ...................................................................................... 9
Chapter 2. Fiscal policy in the Russian Federation ............................................... 11
§ 1. Main indicators of the Russian fiscal policy .................................................. 12
§ 2. Recent developments in fiscal policy in Russia ............................................. 15
Chapter 3. Effectiveness of fiscal policy............................................................... 17
§ 1. The concept of fiscal policy effectiveness. .................................................... 17
§ 2. The effectiveness of Russia's fiscal policy. .................................................... 19
Conclusion ........................................................................................................... 22
Bibliography ........................................................................................................ 23
2
Introduction
Fiscal policy is the activity conducted by the state in order to influence the
economy, it is done by regulating taxes and public expenditures. The purpose of this
course work is to reveal the impact of fiscal policy on the Russia's economic
development and consider the current aims of the government's fiscal policy and
how effective they are.
The object of this research is fiscal policy in Russia as the macroeconomic tool
of regulation of economy. The subject of research is the current aims of Russian
fiscal policy and the effectiveness of this policy. The goals of work could be
achieved by following points:
 To understand the main principles of fiscal policy;
 To study fiscal policy tools and their impact;
 To consider the development of fiscal policy in Russia;
 To reveal advantages and disadvantages of fiscal policy.
As methods for solving the tasks set general scientific methods, such as the
method of analysis and synthesis, scientific abstraction, induction and deduction,
dialectical approach, comparative analysis, content analysis of documents were
applied.
Course paper consists of Introduction, three Chapters, Conclusion, Bibliography
and two Appendices. In the first chapter I will discuss the nature and necessity of
fiscal policy and how it uses tools to influence the Russian economy. The second
Chapter focuses on analyzing Russian fiscal policy, what the main indicators are and
how fiscal policy is changing and evolving. The third Chapter is devoted to how
effective fiscal policy is for Russia's macroeconomic development, what are the aims
of fiscal policy and how this affects the economy.
Project statement: Economic growth in Russia depends on the quality of fiscal
policy.
The information base for the study were the normative documents, academic
literature and scientific works of domestic and foreign economists. The topic was
3
researched thanks to the textbooks written in recent years, study guides and
monographs of such authors Balatsky E. V., Krymskaya O. Н., Kalinina O.V. etc.
The complexity of such literary sources makes it possible to investigate the topic in
full.
4
Chapter 1. The essence of the fiscal policy
There are several ways in which the state regulates the economy, for example
monetary policy and fiscal policy. Fiscal policy is one type of economic policy used
by government. Economic policy involves the implementation of the state's
economic functions by means of measures to influence economic processes in order
to realize certain objectives.
Fiscal policy is a measure that involves using the capacity of the government
to stabilize the economy by changing the amount of state budget revenue and/or
expenditure, that is levying taxes and spending state budget funds. It is a government
policy that is implemented by the legislature as it controls taxation and the state
budget1.
The main instruments of fiscal policy are changes in public expenditure, taxes
and transfer payments. There are different types of fiscal policy, for instance,
incentive and disincentive, discretionary and non-discretionary (automatic), I will
discuss them in more detail in a later chapter. The main objectives of fiscal policy
are2:
 Smoothing the fluctuations of the economic cycle;
 Stabilization of economic growth;
 Achieving high employment rates;
 Reducing the rate of inflation.
Fiscal policy affects the national economy through commodity markets.
Changes in government spending and taxes are reflected in aggregate demand and
affect macroeconomic objectives through it. The main objective of fiscal policy is
to balance the macroeconomic system.
Матвеева Т. Ю., преподаватель НИУ-ВШЭ "Макроэкономика: Курс лекций для экономистов", 2001 год.
URL: http://www.ereport.ru/articles/macro/macro16.htm. (дата обращения: 20.04.2021).
2
Kostogryz A. G. “FEATURES OF FISCAL POLICY OF THE RUSSIAN FEDERATION IN MODERN
CONDITIONS OF UNCERTAINTY”. URL: ttps://files.scienceforum.ru/pdf/2017/32840.pdf (дата обращения:
20.04.2021)
1
5
§ 1. Fiscal policy instruments and their impact
The state, in the case of Russia, the government implements fiscal policy with
the help of certain instruments. The instruments of fiscal policy are defined as
economic mechanisms through which the objectives are achieved. These
instruments include3:
 tax - an amount of money paid to the government that is based on your income
or the cost of goods or services you have bought;

transfers - government payments that are not related to the purchase of goods
and services, but include payments of student grants, pensions and so on;
 subsidies - money given by a government or other organization to pay part of
the cost of something;
 other public expenditure.
Each instrument affects economic growth and efficiency in a different way. And
depending on the phase of the cycle in which the economy is in, the fiscal policy
instruments are also used in different ways.
It is worth noting that fiscal policy affects aggregate demand and supply through
its instruments. Let us consider how the instruments of fiscal policy affect it by
starting with the impact of fiscal policy instruments on aggregate demand.
First of all, it should be said that aggregate demand is the amount of final goods
and services that consumers are willing to purchase at a given price level and
conditions. In economics, aggregate demand is usually defined as AD 4.
𝐴𝐷 = 𝐶 + 𝐼 + 𝐺 + 𝑋𝑛
(1),
where C - Consumer spending;
I - Gross business investment expenditure;
G - Government purchases of goods and services;
3 Котар О.К., Фискальная политика: краткий курс лекций для студентов 3 курса направления подготовки
38.03.01 Экономика, 2016. URL: http://sgau.ru/files/pages/22738/14710908140.pdf (дата обращения:
25.04.2021)
4
Матвеева Т. Ю., преподаватель НИУ-ВШЭ "Макроэкономика: Курс лекций для экономистов", 2001 год.
URL: http://www.ereport.ru/articles/macro/macro16.htm. (дата обращения: 20.04.2021).
6
Xn - Net exports of goods and services.
It follows from the formula that an increase in public procurement increases
aggregate demand, while a decrease in public procurement leads to a decrease in
aggregate demand, as public procurement is part of government spending.
An increase in transfers also increases aggregate demand. For example, an
increase in social transfer payments (social benefits) increases households' personal
income and hence disposable income, which increases consumer spending.
Moreover, an increase in transfer payments to firms (subsidies) increases the
financing of firms, the ability to expand production, which leads to an increase in
investment spending, while a reduction in transfers reduces aggregate demand.
On contrary an increase in taxes reduces both consumer spending (as
disposable income is reduced) and investment spending (as retained earnings, the
source of net investment, are reduced) and hence reduces aggregate demand.
Accordingly, lower taxes increase aggregate demand.
Now let us look at the impact of fiscal policy instruments on aggregate supply.
Arthur Laffer was the first economist to examine the impact of fiscal policy
instruments on aggregate supply. He showed the impact of changes in tax rates on
the level of economic activity, by drawing a curve (see picture 1) that shows the
impact of changes in the tax rate on the total amount of tax receipts into the
government budget5.
Picture 1 – Laffer curve
Матвеева Т. Ю., преподаватель НИУ-ВШЭ "Макроэкономика: Курс лекций для экономистов", 2001 год.
URL: http://www.ereport.ru/articles/macro/macro16.htm. (дата обращения: 20.04.2021).
5
7
Laffer's idea was that there is an optimal tax rate at which business activity is
maximized and therefore tax revenues are maximized. Subsequently Arthur Laffer
derived the formula:
𝑇 = 𝑡 ∗ 𝑌 (2),
where T - the amount of tax revenue
t - the tax rate
Y - the amount of aggregate income.
An example of the impact of fiscal policy on aggregate supply: as firms treat
taxes as a cost, an increase in taxes leads to a reduction in aggregate supply, while a
reduction in taxes leads to an increase in business activity and output. An example
might also be that if income taxes are reduced, this encourages firms to increase
investment activity.
Thus, I have considered how policy affects aggregate demand and aggregate
supply, what tools the government can use to affect it, and what the possible effects
of such policy on the economy might be.
8
§ 2. Types of fiscal policy
Researchers distinguish between the following types of fiscal policy:
incentive (also called stimulative) and disincentive, discretionary and automatic
(also called non-discretionary).
Let us start by looking at stimulative and disincentive fiscal policies. A
stimulative fiscal policy is carried out during an economic downturn. It involves
reducing taxes and increasing public expenditure, which leads to budget deficits.
The aim of this policy is to prevent a decline in output and unemployment and to
increase aggregate demand. The instruments of stimulative fiscal policy are 6:
 an increase in government procurement;
 lower taxes;
 an increase in transfers.
Fiscal restraint policies are implemented when there is inflation. This involves
increasing tax revenues and reducing public expenditure, which leads to a budget
surplus. The aim of this policy is to reduce the rise in inflation and reduce aggregate
demand. The instruments of a restraining fiscal policy are 7:
 a reduction in public procurement;
 increase in taxes;
 reduced transfers.
Other types of fiscal policy are automatic (non-discretionary) and
discretionary fiscal policy. Discretionary fiscal policy is a legislative change in the
number of public transfers, taxes, and government procurement to stabilize the
economy.
Automatic fiscal policy consists in unplanned structural changes in taxes and
government purchases. Automatic fiscal policy is related to the action of built-in
(automatic) stabilizers, they are instruments whose value does not change, but whose
Матвеева Т. Ю., преподаватель НИУ-ВШЭ "Макроэкономика: Курс лекций для экономистов", 2001 год.
URL: http://www.ereport.ru/articles/macro/macro16.htm. (дата обращения: 20.04.2021).
7
Матвеева Т. Ю., преподаватель НИУ-ВШЭ "Макроэкономика: Курс лекций для экономистов", 2001 год.
URL: http://www.ereport.ru/articles/macro/macro16.htm. (дата обращения: 20.04.2021).
6
9
mere presence automatically stabilizes the economy. Automatic stabilizers of fiscal
policy include8:
 income tax (which includes both household income tax and corporate income
tax);
 indirect taxes (primarily a value-added tax);
 unemployment benefits;
 poverty benefits.
Thus, depending on the economic situation, one of the above types is used.
For instance, during the overheating economy will be preferable to use
contractionary fiscal type of fiscal policy. However, during an economic downturn
stimulative fiscal will be more suitable.
Матвеева Т. Ю., преподаватель НИУ-ВШЭ "Макроэкономика: Курс лекций для экономистов", 2001 год.
URL: http://www.ereport.ru/articles/macro/macro16.htm. (дата обращения: 20.04.2021).
8
10
Chapter 2. Fiscal policy in the Russian Federation
Every state pursues one fiscal policy or another. Whether it has a positive or
negative effect on the economy depends on whether the fiscal policy instruments are
used wisely in a given situation. Therefore, governments need to act so that by
removing unnecessary public expenditure they can reduce taxation, which will
create the right conditions to form and run businesses, but also consider that transfer
payments should not be taken away from those who need them badly.
Government fiscal policy is one of the most important and integral parts of
the general economic policy of the state and has its own characteristics at any given
time. The basic goals of Russia, as of any other country, during fiscal policy are 9:
 stable growth of government revenue;
 low inflation;
 absolute employment of the population;
 mitigation of cyclical fluctuations in the economy.
Ширяев А. А. “ФИСКАЛЬНАЯ ПОЛИТИКА ГОСУДАРСТВА КАК ИНСТРУМЕНТ ИННОВАЦИОННОЙ
ПЕРЕСТРОЙКИ ЭКОНОМИКИ СТРАНЫ” URL:
https://riep.ru/upload/iblock/46c/46c499463de02b7caf76b8c86638948a.pdf . (дата обращения: 23.04.2021).
9
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§ 1. Main indicators of the Russian fiscal policy
Like any economic phenomenon, fiscal policy has its own indicators, which
are used to determine the success of fiscal policy, which type of fiscal policy should
be applied in any given situation. The indicators describe the main uses of the state's
financial resources and the main sources of public expenditure. Moreover, the
indicators help to understand how effective the fiscal policy of the state is.
One of the most important indicators of fiscal policy and economy as a whole
is gross domestic product (GDP). It is a macroeconomic indicator that reflects the
market value of all final goods and services for final use produced within the territory
of one country over a certain period of time. To understand the relationship between
fiscal policy and GDP it is necessary to know what fiscal multipliers are 10.
The fiscal multiplier measures the effect that increases in fiscal spending will
have on a nation's economic output, or gross domestic product (GDP). The fiscal
multiplier is the ratio of the change in output to the change in tax revenue or
government spending. Fiscal multipliers provide an indication of the impact of fiscal
policy on GDP growth, and GDP growth indicates a successful maneuver in fiscal
policy and economic development. The fiscal multiplier is used by economists to try
to quantify how a given spending or tax policy will ultimately impact GDP. Fiscal
multipliers can be measured in several ways. Generally, they are defined as the ratio
of a change in output (ΔY) to a discretionary change in or tax revenue (ΔG or ΔT).
Thus, the fiscal multiplier measures the effect of a $1 change in spending or a $1
change in tax revenue on the level of GDP. Two multipliers are commonly used
(focusing on expenditure): The formulas of fiscal multipliers are11:
Impact multiplier = (∆Y(t))/(∆G(t)) (3)
10
Campbell R. McConnell Stanley L. Brue “ECONOMICS: PRINCIPLES, PROBLEMS, AND POLICIES” URL:
file:///C:/Users/Arina/Downloads/Mcconnell_Brue_Economics_17th_edition%20(1)%20(1).pdf (дата обращения:
30.04.2021).
11
Nicoletta Batini, Luc Eyraud, and Anke Weber “A Simple Method to Compute Fiscal Multipliers”, 2014. URL:
https://www.imf.org/external/pubs/ft/wp/2014/wp1493.pdf (дата обращения: 06.05.2021)
12
where t can be a quarter or a year depending on the frequency of the data that
is used in the study;
Y is gross domestic product (output)
G is government spending
The “overall” multiplier describes the output response to an unspecified fiscal
shock, while the “revenue” (“spending”) multiplier relates output to a discretionary
change in revenue (spending)12.
There is also the tax elasticity, which can be used to calculate the effectiveness
of a fiscal policy over a period of time. The tax elasticity is the relative change in
tax revenues when the tax system is unchanged in relation to the relative change in
the tax base, but if GDP is used instead of the tax base, the elasticity of the tax system
as a whole can be calculated, which will show the dependence of changes in tax
revenues on changes in the economic growth indicator, i.e. GDP. The formula of tax
elasticity is 13:
E=
∆𝑇/𝑇
∆𝐺𝐷𝑃/𝐺𝐷𝑃
(5),
where, E – tax elasticity;
T – tax revenue
GDP – gross domestic product.
Another important indicator, like the elasticity of the tax system, is the
dynamism of the tax system. This indicator is determined by the increase in the
amount of taxes collected in relation to the relative increase in GDP.
The tax burden ratio is another indicator of the fiscal policy that determines
its effectiveness. The tax burden is the ratio of the amount of taxes paid by the
economically active population to the income of the population. It is also important
Nicoletta Batini, Luc Eyraud, and Anke Weber “A Simple Method to Compute Fiscal Multipliers”, 2014. URL:
https://www.imf.org/external/pubs/ft/wp/2014/wp1493.pdf (дата обращения: 06.05.2021)
13
Крымская О. Н. Фискальная политика РФ: основные приоритеты и эффективность // Colloquium-journal.
2019. №6 (30). URL: https://cyberleninka.ru/article/n/fiskalnaya-politika-rf-osnovnye-prioritety-i-effektivnost (дата
обращения: 05.05.2021).
12
13
to know the indicators of tax revenues, the income of the population, and the number
of economically active population itself in order to understand the extent to which
the fiscal policy pursued has a positive impact on the economic growth of the
country. The formula of tax burden ratio14:
𝐾𝑝 =
𝑁𝑝 /𝑁𝑛
𝐷/𝑁𝑛
=
𝑁𝑝𝑑
𝐷𝑑
(6),
where 𝐾𝑝 - tax burden ratio;
𝑁p - taxes paid by the population;
𝑁𝑛 - number of economically active population;
D - income of the population as wages for employees.
All the above indicators help to understand how the overall use of fiscal policy
instruments affects the well-being of the national economy. It is essential to keep
track of this indicator in order to adapt the fiscal policy to current changes.
Крымская О. Н. Фискальная политика РФ: основные приоритеты и эффективность // Colloquium-journal.
2019. №6 (30). URL: https://cyberleninka.ru/article/n/fiskalnaya-politika-rf-osnovnye-prioritety-i-effektivnost (дата
обращения: 05.05.2021).
14
14
§ 2. Recent developments in fiscal policy in Russia
Since every year we experience different shocks in politics, the economy, and
the social life of citizens, it is necessary to make changes that would improve the
situation for a given period of time. Changes in fiscal policy are mainly due to
changes in taxes and subsidies.
Let us look at some of the changes in tax rates over the last couple of years.
One of the recent changes is that on 1st January 2021, a progressive personal income
tax (PIT) scale was introduced. Now when personal income does not exceed 5
million rubles per year is will be taxed as before at 13%, but if the income exceeds
this amount, it will be taxed at 15%. Excess income will also be remitted under a
separate budget classification code (KBC). This change hints at a kind of
equalization of the position of taxpayers. This change raises the state budget, which
allows for an increase in various transfers 15.
In 2019 there has been an increase in the rate of value added tax (VAT) for
some group of goods from 18% to 20%. The VAT increase was enshrined in Federal
Law No. 303-FZ and the law applies to all transactions from 1 January. Such changes
have had an impact on inflation in Russia. Elvira Nabiullina, head of the Central
Bank, said in late November that the VAT increase was a factor in the short-term
impact on inflation, but could also have long-term effects. The Bank of Russia
estimates that as a result, inflation reached 5.5 percent at the beginning of the year.
In the second half of 2019, the rate of increase in consumer prices began to slow and
returned to 4 per cent in the first half of 202016.
Also from 2019, the income of self-employed citizens will be taxed. This
introduction is experimental for 10 years and is unprecedented, as this type of tax
has not yet been introduced in Russia. Formally, this type of tax is called the
Professional Income Tax (PIT). Individuals, including individual entrepreneurs who
Известия “В России с 1 января начала действовать прогрессивная шкала НДФЛ”, 2021. URL:
https://iz.ru/1107354/2021-01-01/v-rossii-s-1-ianvaria-nachala-deistvovat-progressivnaia-stavka-ndfl (дата
обращения: 07.05.2021).
16
РИА Новости “Ставка НДС в России выросла с 18 до 20 процентов”, 2019. URL:
https://ria.ru/20190101/1548961683.html (дата обращения: 07.05.2021).
15
15
do not have an employer and do not employ salaried workers, are subject to this tax.
Individuals and sole traders who switch to the new special tax regime (NTC) can
only pay tax at a reduced rate on self-employment income. A 4% tax is imposed on
the income of individuals, while a 6% tax is imposed on the income of sole
proprietors. The introduction of this tax allows you to run your business legally and
generate part-time income without the risk of being fined for illegal business
activities 17.
Public expenditure includes subsidies. Over the last couple of years, the
Russian government has introduced new payments to citizens. One of the
innovations in subsidies has been the payment of 450,000 rubles to families with 3
or more children from September 2019. Thanks to this subsidy, families can give the
money to repay their mortgage, use the payment to buy or build a house or to repair
it. The government also offered business in the spring of 2021 for employing
unemployed people. In this way, the government tries to reduce the number of
unemployed people in the country and increase the number of taxpayers 18.
Changes in tax rates and the introduction of a new tax mean an increase in the
expenditure of a solvent citizen (especially affected by a change in the VAT rate) as
well as an increase in cash receipts for the state budget. Such changes have to be
related to the current economic situation in the country, as changes in taxes affect
inflation, GDP, investment and business activity in general.
ФНС РОССИИ “с 2019 года доходы самозанятых граждан облагается налогом”, 2019. URL:
https://npd.nalog.ru/ (дата обращения: 07.05.2021).
18 РБК, “Власти предложили изменения в программу выплат на ипотеку многодетным”, 2020. URL:
https://www.rbc.ru/finances/11/06/2020/5ee09c639a79478f5a18d843 (дата обращения: 07.05.2021).
17
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Chapter 3. Effectiveness of fiscal policy
§ 1. The concept of fiscal policy effectiveness.
The effectiveness of the current fiscal policy and how to optimise it is one of
the current challenges for the government. The solution to such challenges involves
many different approaches, among which qualitative or quantitative methods of
addressing the problem can be noted.
The qualitative method consists of streamlining and improving all tax
legislation. In contrast, the quantitative method consists of determining the most
rational tax rates within the current fiscal mechanism; it involves optimising the
values of individual tax rates and the total tax burden on both legal entities and
individuals19.
The effectiveness of fiscal policy can be assessed from different perspectives,
namely that of the economic agent (the source of taxation) and the state (the recipient
of taxes). When assessing fiscal policy from the government's perspective, two
aspects of the analysis are possible: assessing the effectiveness of fiscal policy that
affects the productive activity of the economic system and assessing the content of
the revenue side of the state budget.
The values of the coefficient of elasticity of the tax system vary. The
following can be distinguished 20:
 if the elasticity is greater than one, the tax system is considered elastic if there
is a faster increase in tax revenues relative to GDP, i.e., the share of tax
revenues in gross income increases;
 if the elasticity is less than unity, the tax system is inelastic, i.e., the share of
tax revenues decreases;
Tejvan Pettinger “Fiscal Policy”, 2019. URL: https://www.economicshelp.org/macroeconomics/fiscalpolicy/fiscal_policy/#:~:text=It%20depends%20on%20the%20state,sector%20saving%20has%20increased%20subs
tantially (дата обращения: 08.05.2021)
20 Крымская О. Н. Фискальная политика РФ: основные приоритеты и эффективность // Colloquium-journal.
2019. №6 (30). URL: https://cyberleninka.ru/article/n/fiskalnaya-politika-rf-osnovnye-prioritety-i-effektivnost (дата
обращения: 05.05.2021)
19
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 if the elasticity is equal to one, then the share of tax revenues in GDP remains
stable, i.e., tax revenues change in the same way as national income.
Information on the effectiveness of the government's fiscal policy is
necessary to understand whether the government's economic decisions are
implemented correctly and in a timely manner, and whether certain fiscal policy
measures are applied. To understand the effectiveness of fiscal policy in Russia, it
is necessary to analyse the effectiveness of fiscal policy, looking at its performance
over time.
18
§ 2. The effectiveness of Russia's fiscal policy.
Given today's difficult realities, one of the most important tasks is to maintain
the positive dynamics of the national economy. The fiscal policy of any state must
be evaluated in terms of its effectiveness.
There are various ways to evaluate the effectiveness of fiscal policy, but in
this work, we will assess the impact of Russian fiscal policy on the basis of the
following indicators:
 the deficit of Russian budget;
 the elasticity of the Russian tax system;
 the changes in tax collection;
 tax burden coefficient.
In order to calculate all mentioned indicators, we need to accumulate the raw
data on gross domestic product, tax collected, personal income tax, economically
active population, average household income, consolidated budget revenues and
expenditures.
Table 1 – Initial information21
Name of indicator
GDP (RUB billion)
Taxes (RUB billion)
Personal income tax (RUB billion)
Economically active population (thousand people)
Average household income Dd (RUB)
Consolidated budget revenues (RUB billion)
Consolidated budget expenditure (RUB billion)
2016
85616.1
14482.4
3017.3
75934.9
36709.0
28182.0
31324.0
2017
91843.2
17343.2
3251.1
76229.3
38287.5
31047.0
32396.0
2018
104629.6
21328.3
3653.0
75817.7
39933.9
37320.0
34285.0
2019
110046.1
22737.0
3955.2
74941.0
39414.7
39498.0
37382.0
According to some scholars, one the most important indicator of the
effectiveness of the tax system is the tax elasticity coefficient, as it is quite common
in Russian tax practice. This indicator describes the change in tax revenues as a
function of changes in economic growth (GDP), see in chapter 2 the formula. Tax
burden is another essential indicator as it takes into account the number of
economically active population, more information see in chapter 2. The results of
Федеральная служба государственной статистики Статистический сборник “ФИНАНСЫ РОССИИ 2020”,
2020. URL: https://rosstat.gov.ru/storage/mediabank/aKW33VFk/finans_2020.pdf (дата обращения: 09.05.2021)
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19
the analysis for various indicators are shown in table 2, they suggest that the values
of each assessed indicator are changing.
Table 2 – Results
From the table 2 we can see that in 2019 in comparison with 2018 GDP
increase by 5416.5 billion rubles which accounts 4.9 percent increase. Overall, we
can observe that GDP grew for the last 4 years. GDP is not precisely a fiscal policy
indicator, but it shows the state of overall economy. Similar patterns we can observe
in tax levies, it has increased from 2016 to 2019. During the last period it increased
by 1048.7 billion rubles or 7.2 percent.
We can also see that Npd, this is the ratio of taxes paid by the population per
number of economically active population, has risen from 42648.96 to 5277.79
billion (or millions) rubles every year in this period.
The elasticity coefficient (E) for 2016-2019 decreases, which means that the
RF tax system is increasingly less elastic over this period, the decline from 2.43 to
1.26 is significant. Thus, between 2016 and 2019, the elasticity of the Russian tax
system has decreased, but it is still greater than one, which means that tax revenues
are increasing at a faster rate than the value of this indicator, and the share of taxes
in it is also increasing.
20
Over the period given, the value of the tax burden elasticity coefficient (Kp)
has gradually increased, due to the fact that tax revenues have also increased each
year. By 2019 the tax burden coefficient increased slightly, changing from 1.11 in
2017 to 1.34 in the last period. However, the values of this indicator are consistently
high during the last 3 years (more than 1). As this indicator is increasing year on
year, it means that tax revenues are growing faster than GDP. This is not a positive
situation for the economy.
Regarding the budgetary deficit we can see that due to the increase in tax
revenues, the difference between state revenues and expenditures has gone from
negative to positive, the Russian budget in 2018 has gone from deficit to surplus.
The picture 2 shows the budget the graph over the last years.
Picture 2 – Budgetary deficit/surplus from 2016 to 2019
Budgetary deficit
4000
3035
3000
2116
2000
1000
0
-1000
1
2
3
4
Budgetary
deficit
-1349
-2000
-3000
-4000
-3142
We cannot give a definite answer because some indicators show
improvement, while others show deterioration. Every year GDP increases, but at the
same time tax revenues for the state budget also increase. Although the elasticity
coefficient decreases every year, it is still greater than one, indicating a constant
increase in tax revenues. Also, the tax burden ratio is decreasing, but also greater
than one, which makes fiscal policy less effective. But at the same time the country's
budget has gone from deficit to surplus, a figure that is not unequivocally positive.
21
Conclusion
Fiscal policy exists to regulate the level of economic activity by using the
government's ability to tax and spend the state budget. The main goal of government
regulation of the economy using fiscal policy instruments is to ensure a stable rate
of economic growth. Fiscal policy is designed to ensure the sustainability of
economic development. It can deal with rising inflation and an increase in the
number of unemployed in the state.
Which type of fiscal policy the government chooses to implement to combat
a particular economic problem depends on the economic situation in the country. If
fiscal policy is stimulative, that is, it increases government spending and reduces
taxes during a downturn in the economy. And if fiscal policy is restrictive, i.e., it
increases taxes and reduces public expenditure during a downturn in the economy.
The use of the discretionary type of fiscal policy is to be understood as the legislative
impact on changing or regulating the economy. The latter is the result of an
automatic (non-discretionary) fiscal policy, which is influenced by unplanned
structural changes in taxes and government procurement.
The fiscal policy instruments and their various manipulations, such as
reducing or increasing government procurement, increasing or decreasing taxes, or
decreasing or increasing transfers, help to implement one type of fiscal policy or
another. All of these are ways in which fiscal policy affects the economy of a state.
Russia's main objectives in using fiscal policy in times of crisis are to mitigate
fluctuations in the economic cycle, to stimulate economic growth, to reduce
unemployment as much as possible, and to lower the rate of inflation.
An effective fiscal policy can stabilise the economy. This requires considering
and monitoring key indicators such as GDP growth or decline, the number of
economically active population, the increase or decrease in tax revenues, and what
the state spends its revenues on.
Thus, we can conclude that fiscal policy is applied by the government when
economic growth slows down, socio-economic problems worsen, and the country's
finances become unstable.
22
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