Size and Structure of the Budget

The General Government Budget of the Russian Federation includes the federal government budget and the subnational budgets – that is, the regional and local budgets – as well as the main social extra budgetary funds comprising the Pension Fund, the Employment Fund, the Social Insurance Fund, and the Federal Medical Insurance Fund. The federal and the subnational budgets are jointly designated as the consolidated budget. As can be seen in Table 26-1, between 1994 and 1998, at the core of the system, the federal revenues declined from 11.8 percent of the GDP in 1994, after various rises from 1995 to 1997, to only 10.7 percent by 1998. Outlays, moving on a higher level, contracted from 23.2 percent of the GDP in 1994 to 16.6 percent in 1998. All this left a federal deficit amounting to 5.9 percent of the GDP. I will examine further on in detail the multiple causes of the general decreasing trends. For now, let me note only that the critical reasons of the contractions have been, on the one hand, the continuous fall in profitability throughout the economy and, on the other hand, the manifest incapacity of the government to limit spending.

Consider now the structure of the budgetary system. The capital instrument of budget receipts, taxation, has been continually hampered by the excessive number of taxes and by the granting of numerous exemptions that have encouraged tax evasion.