Fiscal Transition In Countries Of The Former Soviet Union

This paper reviews the uneven record of fiscal performance in the states of the former Soviet Union since independence. Deficits have come down rapidly, an important contribution to stabilization. Given, however, the unexpectedly severe revenue decline and limited financing, the stabilization was reached by sharp cuts in expenditure. The cuts were abrupt and not focused on transition goals, and the instruments used vitiated normal budgetary processes. Hence, benchmarks of fiscal success other than stabilization are elusive. Government intervention and subsidies remain important, social spending is inefficient, and there is little evidence in the budget of restructuring.

This paper reviews the uneven record of fiscal performance in the states of the former Soviet Union since independence. Deficits have come down rapidly, an important contribution to stabilization. Given, however, the unexpectedly severe revenue decline and limited financing, the stabilization was reached by sharp cuts in expenditure. The cuts were abrupt and not focused on transition goals, and the instruments used vitiated normal budgetary processes. Hence, benchmarks of fiscal success other than stabilization are elusive. Government intervention and subsidies remain important, social spending is inefficient, and there is little evidence in the budget of restructuring.

Since the dissolution of the Soviet Union at the end of 1991, Russia and the other countries which were members of the USSR have adopted value-added taxes. The value-added tax now provides a very significant portion of total tax revenue in all of these countries. Ideally, the value-added tax will serve as a relatively efficient, neutral, revenue source at the national level. The Russian value-added tax, however, contains a number of unique provisions, reflected in the laws of many of the other transition countries, which cause it to fall short of this standard. These countries also must decide how their value-added taxes are to apply to trade among themselves. This paper describes several of the provisions unique to the Russian value-added tax and analyzes their probable effects. It then discusses the development of arrangements which have evolved to date with respect to applying the value-added tax to trade among the transition countries, and suggests possible answers to the vexing questions raised by this issue.

This edition of the Joint Economic Committee's 1993 reports on the economies of the ex-Soviet states tracks the Soviet and post-Soviet economic reform efforts, and looks at issues such as integration and developments.

Starting in the early 1990s, the Baltics, Russia, and other (BRO) countries of the former Soviet Union initiated tax reforms that varied widely at the later stages. Recently, some of the BRO countries, basing decisions on the proposition that lowering of the top marginal income tax rate would significantly benefit economic development and increase tax compliance, have initiated a new stage of tax reforms. This paper reviews country experiences and suggests that (i) overall, there seems to be little evidence of a substantial improvement in income tax revenues resulting simply from a reduction in the top marginal tax rates, and (ii) in the BRO countries, the elasticity of the behavior of economic agents, in terms of labor supply, saving, and investment, with respect to income tax rates is not large, and a reduction of the existing income tax rates is unlikely to lead to a notable expansion of economic activity.

A decade into the transition, many of the successor states of the former Soviet Union (FSU) continue to use energy sector quasi-fiscal activities (QFAs), especially low energy prices and the toleration of payment arrears, to provide large implicit and untargeted subsidies. These activities disguise the overall size of the government, cause overconsumption and waste, and contribute to macroeconomic imbalances. This paper analyses such activities in FSU countries, with particular emphasis on two case studies (Azerbaijan and Ukraine). The paper's policy conclusions point to the need to increase energy prices, combined with a strengthening of safety nets to protect the poor, better enforcement of payment discipline, and more efforts to achieve fiscal transparency.

This interdisciplinary study offers a comprehensive analysis of the transition economies of Central and Eastern Europe and the former Soviet Union. Providing full historical context and drawing on a wide range of literature, this book explores the continuous economic and social transformation of the post-socialist world. While the future is yet to be determined, understanding the present phase of transformation is critical. The book’s core exploration evolves along three pivots of competitive economic structure, institutional change, and social welfare. The main elements include analysis of the emergence of the socialist economic model; its adaptations through the twentieth century; discussion of the 1990s market transition reforms; post-2008 crisis development; and the social and economic diversity in the region today. With an appreciation for country specifics, the book also considers the urgent problems of social policy, poverty, income inequality, and labor migration. Transition Economies will aid students, researchers and policy makers working on the problems of comparative economics, economic development, economic history, economic systems transition, international political economy, as well as specialists in post-Soviet and Central and Eastern European regional studies.

The wide variation in transition economies raises questions about differences in economic growth, the applicability of transition policies, and the advantages of economic reform. This report seeks to answer these questions.