The federal budget revenues fall in July, and the budget to stay in deficit in 2H22

RUSSIA ECONOMICS - In Brief 15 Aug 2022 by Alexander Kudrin

---

The Ministry of Finance reported that the federal budget revenues fell considerably – either m-o-m or y-o-y. Usually, tax collection in July is higher than in June as some companies pay some taxes quarterly. This year, the non-oil-and-gas revenues fell in July by 21.1% and 34.3% m-o-m and y-o-y, even though high inflation and moderate GDP contraction could have prompted a somewhat better fiscal performance. Overall in July, the government collected R1.761 trln in total revenues (including the non-oil-and gas revenues and the rest). In June, the full figure was higher – R1.974 trln. It implies a 10.8% m-o-m contraction in July in total federal budget revenue collection. Earlier Rosstat preliminary reported that in 2Q22, the Russian GDP contracted by 4.0%, which was in line with an earlier estimate of the Economics ministry. It means that in 1H22, the Russian GDP could have contracted y-o-y by no more than 0.4%, i.e., the contraction was rather moderate, and there are no signs that the economy started collapsing in July yet. Meanwhile, according to the Ministry of Finance, the authorities collected only R278.6 bn of the domestically generated VAT in July, which is somewhat 47% lower than the monthly average VAT collection in 1H22. Note that VAT is the primary source of revenues for the federal budget (apart from various oil-and-gas taxes). At the same time, the VAT on imported goods fell in July by around 26% relative to the average monthly level in 1H22. Profit tax collection fell in July by 15% relative to the average monthly volume collected in 1H22. Overall, it looks as though businesses are delaying paying some taxes, such as VAT, as this option of offered by the au...