Strong profit tax collection hints at better growth
Rosstat reported that w-o-w inflation remained at 0.1% for another week, consumer prices increased by a mere 0.2% from December 1 to 16, and inflation in 2019 as a whole is likely to stay around 3.1% or even lower, to fall well below 3.0% next month (say, to around 2.5%) and to stay around this level for several months.
Tax collection looks strong in 2019 despite reportedly sluggish growth. A consistently strong tax collection from the non-oil-and-gas segments of the economy, including the profit tax, may hint that the current economic growth rate is probably somehow understated.
The federal budget became more dependent on the VAT and profit tax, which combined provide around 68% of its revenues. In some sense, the tax base of the federal budget has narrowed. In spite of increased tax rate, VAT changed little as part of non-oil-and-gas revenues – in fact it has even slightly declined in 11M19, while profit tax revenues increased.
If economic growth remains sluggish and inflation stays low in the years to come with a relatively stable oil price, then the federal budget surplus, which is currently envisioned by the government to persist for another three years, may evaporate sooner rather than later.
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