How was the budget of the Vitebsk region formed and what expenses are expected in 2016?

The next financial year, which began simultaneously with the calendar year, is predicted to be no less challenging for the region than 2015, both in terms of revenue generation and expenditure financing. "Vitebskiye Vesti" asked the Head of the Main Financial Department of the Regional Executive Committee, Boris Kichanovsky, to summarize the budget results of the past year and outline the main features of 2016.

– Boris Valentinovich, what factors had the greatest impact on budget execution in 2015?

– The treasury's revenue was affected by the economic downturn, particularly among the country's main trading partners, especially Russia. I would like to emphasize that the dynamics of the region's GRP were negatively impacted by the slowdown in sectors that collectively account for about 70% of the gross value added in our region – these are manufacturing, agriculture, construction, trade, transport, and communications.

The profit of organizations before tax decreased by 2 times compared to 2014, which led to losses in planned local budget revenues from profit tax. The inability of most enterprises to increase their wage funds resulted in failure to meet the target for average wage growth and, consequently, a shortfall in personal income tax. Thus, the total loss of the region's own budget revenues is estimated at 900 billion rubles. Furthermore, problems in filling the republican budget led to a reduction in the amount of gratuitous transfers to the regional budget.

I would also like to note that not all taxpayers comply with payment discipline. Among the main violators are enterprises subordinate to local authorities, whose overdue debt exceeded 130 billion rubles. This should not be the case.

– To what extent did you have to "tighten your belts" in financing expenditures under these circumstances?

– Indeed, to ensure budget balance, expenditure optimization had to be carried out to a significant extent, making difficult decisions to reduce subsidies for housing and communal services organizations and capital expenditures in social sectors. Expenditures were reduced by more than 800 billion rubles in these two areas alone.

Nevertheless, the allocation of budget resources was carried out in strict accordance with established priorities, with funds primarily directed towards salary payments and ensuring basic obligations in the budget sector.

The social orientation of the budget has been preserved. For 11 months of 2015, almost 8.9 trillion rubles were directed to social sectors, or 65% of the region's budget expenditures. In addition, within the available financial resources, support was provided to the agro-industrial complex, housing and communal services (including preparation for the heating season), and transport and road organizations. Significant resources amounting to 380 billion rubles were allocated for servicing the state debt. 600 billion rubles more than planned were allocated for the fulfillment of guarantees when approving the budget.

To successfully complete the budget year, all resources and reserves had to be mobilized to fill the treasury, and funds concentrated on priority expenditures, primarily – on salary payments in the public sector.

– Was it possible to preserve the social orientation of this year's budget, and what measures need to be taken to maintain its balance?

– The conceptual features of the 2016 budget remain unchanged. First of all, this is the stability of its revenue base formation, the foundation of which is traditional revenue-generating taxes. This year, innovative and investment development of the Vitebsk region will continue, with at least 130 new enterprises and production facilities to be created, including with the participation of the relevant target fund of the regional executive committee and the Belarusian Innovation Fund. This will provide an additional impetus to economic development and increase the region's tax potential.

The second conceptual feature is the balance of expenditures with revenues of budgets at all levels. In practice, this means that budget commitments undertaken are fully secured by their funding sources. The pronounced social orientation of the regional treasury has also been preserved. I draw attention to the fact that when forming it, priority expenditures were determined in the amount of 13.6 trillion rubles, or 79%, which are not subject to change. These are the so-called socially protected obligations, guaranteeing social stability in the region. These include funds for salary payments with accruals, payment for medicines, food products, utilities, subsidies for transport and housing and communal services, solid fuel, and transfers to the population.

The total amount of revenues, taking into account gratuitous receipts from the republican budget, will be 17 trillion 432 billion rubles (including revenues of the regional budget – almost 5.6 trillion rubles). The budget is planned with a surplus of revenues over expenditures of 156 billion rubles, which will be used to repay local government bonds, including those issued by the executive committee to support the agro-industrial complex.

The main sources of the revenue base remain personal income tax (36%), VAT (29%), property taxes (13%), payments from revenue under special tax regimes (5.5%), and income from the use of state property (8%).

The volume of budget expenditures guarantees the preservation of the achieved level of state social obligations and an increase in wages in the public sector by an average of 15%. At the same time, additional wage growth for public sector employees can be ensured by directing savings from optimizing expenditures, networks, and staff of public organizations to these purposes and attracting extra-budgetary revenues.

Over 11.2 trillion rubles, or 65% of all expenditures, will be directed to financing social sectors, including education 5.4 trillion rubles (31.1%), healthcare – 4.3 trillion (25%), housing and communal services and housing construction – almost 2.9 trillion (16.5%), social policy – 853 billion (5%), physical culture and sports, culture and media – 734 billion rubles (4.2%).

– What innovations are envisaged in the tax sphere?

– No drastic changes are expected here. The basic rates of budget-forming taxes remain at their current levels: VAT – 20%, profit tax – 18%, personal income tax – 13%. At the same time, the draft amendments to the Tax Code provide for a number of measures that will directly affect the revenue of local budgets. I will name the main ones.

Thus, starting from this year, a higher personal income tax rate (16%) is introduced for taxpayers whose expenses are found by the tax authorities to exceed their income. The personal income tax exemption in the gambling business is abolished, and winnings will be taxed at a rate of 4%. For individuals who participated in state expenditures for less than 183 days in 2015, the deadline for paying a special levy will be August 1, and the regional budget revenues from this source may exceed 100 billion rubles. In addition, the real estate tax rate paid by individuals on their second and subsequent apartments owned has been doubled (from 0.1% to 0.2%).

The maximum rate of the resort fee is increased from 3% to 5%. The Regional Council of Deputies has already exercised its right to increase the rates of real estate tax and land tax by up to 10 times for unused properties or properties that the owner has failed to manage effectively.

 To fully mobilize revenues, it is planned to establish all local levies provided for by law (from procurement agents and resort fees) and a dog ownership tax on the territory of the region, which will be credited to the basic and primary level budgets. The amount of these revenues will be 9 billion rubles.

Close attention will continue to be paid to strengthening the revenue base of primary level budgets. In this regard, local authorities, together with elders and the population, should continue the practice of attracting voluntary contributions from citizens in the form of self-taxation. This will allow accumulating an additional source of funding for current needs in the regions in the budget.

– Can the real economy count on budget support?

– Over 1 trillion rubles are planned to be allocated from the regional treasury for agricultural financing. For the first time, district and Vitebsk budgets include funds for financing the current activities of agricultural producers (85 billion rubles), which should be prioritized for the purchase of fuel and lubricants and mineral fertilizers for spring sowing.

However, these funds are insufficient to provide adequate support to farmers for spring sowing, fodder procurement, crop harvesting, and autumn sowing in 2016. The deficit is estimated at about 2.8 trillion rubles, so the search for additional resources for the development of the agro-industrial complex remains relevant.

One of the sources for such funds could be an extra-budgetary centralized investment fund. In accordance with the legislation, it can be formed by the regional executive committee from part of the profit remaining at the disposal of subordinate organizations. Sponsors can also support farmers.

Sergey Antonov. Photos by Anton Stepanishchev. "Vitebskiye vesti".