Russia Taxes and Government Spending

Taxes:

The Russian Tax Code is the primary tax legislation for Russia. It has 2 parts: the first deals with procedure and the second deals with actual tax rates. The Code is subject to change according to legislation and new laws. The Code is geared towards all federal and local taxes but excludes tariffs. The Russian Ministry of Finance estimates that revenues regulated by the Tax Code will account for 68 percent of federal revenue in 2008 with a majority of other revenues coming from oil and natural gas corporations.

Prior to the establishment of The Code, Russian taxation was VERY unorganized. Tax laws were made up of a patchwork of laws decreed by the USSR and many other local laws. In February of 1995, Boris Yeltin proposed to re-centralize the tax system. When the first draft was presented to the Duma in 1996 there were many complications and the Bill did not end up passing. Finally in 1998, the Duma ended up passing a new draft of the Code with a 312 to 18 vote. Part on was officially enacted on August 6 1998.

Part two, enacted under Vladmir Putin in 2000, intended to reestablish the actual tax rates because at this point the citizen was still paying old rates. It established a fixed 13% income tax and attempted to abolish sales based taxes by getting rid of municipal housing tax, the road tax, and retail sales tax

4. Governmetn system, level of government control, industries they are not involved in

Russia is a constitutional federation with a preseidennt and prime minister. There are three branches: executive, legislative, and judicial. However, Russia's government wasn't always this simple. While Russia was part of the Soviet Union, there was communism and all aspects of the economy were centrally controlled.
 
For the extent of the existence of the Soviet Union, Russia's economy was  strictly controlled. The government controlled all aspects of investment, production, and consumption. This central planning system was based solely on the decisions of the Communist party. The idea was that if every unit of the Union met or exceeded their duties, the supply and demand would balance. The government's role was to ensure that these expectations were met.

Early in the 1990's, the disintegration of the centrally planned government system left Russia to figure out how to operate without the extensive government control. As Gorbachev took power in 1985 he began to shift the economic focus to intensive investment in specific industries that were the most crucial to Russia's economy. These included machine-building and metal working. He also focused on increasing labor productivity. However, his planning system was neither centrally planned nor a market economy. So by the end of 1991 during the official dissolution of the USSR, the economy the was headed into a downward spiral.

Yeltsin along with other leaders created a plan to stabilize restructure Russia's economy. By 1996, there was some success but still many problems left unresolved.

Today, Russia's government still regulates prices on certain goods and it is very difficult to get an accurate reading of their economic standings. The Russian Ministry of Economic Development oversees many of the strategic plans the government employs. 

http://www.mongabay.com/reference/country_studies/russia/ECONOMY.html

Russie: Unemployment, relation to inflation, causes, breakdown of types

As you can see in the graph above, Russia's unemploymnet rate reached an all time high in February of 1999. Interestingly, in the post-communism Russia, Russian officials reported a 2.5 % unemployment in April of 1999 when the "real" rate was at 14.2%. Even this 14.2 % much lower than the actual rate. There were estimated 7.9 million workers who were seeking jobs but were unaccounted for. The true unemployment rate is guesstimated at 25%. The goskomat or Russian state statistics unit acknowledged a 1.4% temporary unemployment rate.

In relation to inflation, in 1999 there was a brief period of increased inflation parallel to the high unemployment rates. 

According to Tatyana Homyakova, the Deputy Director of the Centre for Strategic research at the Academy of National Economy, causes of unemployment include the global economic crisis and structural adjustments in certain industries.She also comments that "Russians just don’t seem to bother that much about unemployment. In the US it was on the news all the time, while Russians were mostly worried about losing their own job. Many people that I’ve talked to mentioned the possibility of finding some small job that they would be able to do, so it’s all up to individual."

Additionally, there are extreme differences in unemployment rates by region. Currently 2% in moscow and 40% in the south of Russia due to different industries.

http://english.ruvr.ru/radio_broadcast/25547106/35411411.html

http://www.tradingeconomics.com/russia/unemployment-rate

http://www.jstor.org/discover/10.2307/155703?uid=3739912&uid=2129&uid=2&uid=70&uid=4&uid=3739256&sid=21101664236773

Russia: Inflation and Price Index, Relationship to GDP, and causes of Inflation

Currently, Russia's CPI inflation is at 6.6 % recorded in December of 2012. In the past 10 years Russia averages a 156.05 % percent inflation with an all time high of 2333 % in 1992 and an all time low in April of 2012 with a CPI of 3.6%.Their price index basket includes mainly food and non-alcoholic beverages.

The fall of the Soviet Union in December of 1991 is directly related the insane amount of inflation in 1992. Before the dissolution of the SU the Russian Federation cntributed to 60 % of all of the Soviet's GDP.

In 1998, the world economic crisis severely damaged Russian economy because of falling prices and low exports of oil and other energy sources that serve as 80% of all exports. This caused great pressure on the ruble, the Russian currency, and created massive inflation. Workers would be paid with bartered goods rather than currency.

Russia recovered quiet well as oil prices began to rise in 1999-2000

Russian government predicts stable growth rates for future years of 3.4% GDP.

Semester Project 1: Russia GDP, major industries, and exports/imports

 Russia has undergone much change in the last twenty years due the fall of the soviet union due to the change from a centrally controlled economy to a market based economy. Russia has a abundance of natural resources including oil, coal, natural gas, and precious metals.

 According to TradingEconomics, Russia's GDP in Decemeber of 2011 was at an all time high of 1857.77 billion US dollars. Betweeen the years of 1989 and 2011 there was a record low in December of 1999 with a GDP of 195.9 US dollars. (These numbers were reported by The World Bank Group.)

 

Exports in 2011 valued 520.9 billion and included petroleum, natural gas, metals, wood, chemicals, and a wide variety of civilian and military manufactures. Imports valued at 322.5 billion and included machinery, vehicles, pharmaceutical products, plastic, semi-finished metal products, meat, fruits and nuts, optical and medical instruments, iron, and steel.  

Major industries include oil and gas, mining, processing precious stones and metals, aircraft building, aerospace production, weapons and military machinery manufacture, electric engineering, pulp-and-paper production, automotive industry, transport, road and agriculture machinery production, light and foodstuffs industries.

the euro.....

 

One of the looming topics in news, the long standing trouble in Greece, has grown to unstoppable heights. The euro in on the brink of failure and along with it the European union and the world economy. The hot topic now is whether or not Germany will bail them out..again.

In an article from the New York Times, the depth of Greece's economic problems are evinced: "Greece has been kept afloat by its fellow euro zone countries, but at a steep price: the austerity measures demanded by France and Germany in return for two massive bailout packages, totaling 240 billion euros, have ripped holes in the Greek safety net and plunged the country into a recession of near-Great Depression dimensions." 

However, much of the bailout money is not being used for Greece's benefit but flowing back into the troika's pocket. The troika is the European Commission, the European Central Bank and the International Monetary Fund. 

The Economist describes a strategic plan that could potentially bring Europe to economic stability: "First, it must make clear which of Europe's governments are deemed illiquid and which are insolvent, giving unlimited backing to the solvent governments but restructuring the debt of those that can never repay it. Second, it has to shore up Europe's banks to ensure they can withstand a sovereign default. Third, it needs to shift the euro zone's macroeconomic policy from its obsession with budget-cutting towards an agenda for growth. And finally, it must start the process of designing a new system to stop such a mess ever being created again."

Any way you look at it, Europe and especially Greece are in grave danger of the euro's failure along with economic downfall. Solving this major problem is going to take a lot or money and compromise which are both in low supply. 

http://www.economist.com/node/21529049

http://topics.nytimes.com/top/news/international/countriesandterritories/greece/index.html

http://www.economist.com/node/18899736 

The "Perfectly" Inelastic Demand of Starbucks

Every morning I MUST have my daily dose of coffee. Without it I am completely lost for the entire day. However, the coffee at Starbucks ( "Fivebucks" as my dad calls it) is somehow superior and I am willing to pay almost any price for their coffee. Obviously if it is 100$ for a tall latte I might cut back, but within reason my demand for Starbucks is perfectly inelastic. Firstly, their are few to no substitutes for Starbucks in walking distance or on my way to and from school and work. It is most definitely essential to my daily life. It does not require a large share of my wealth (or at least per each trip). And lastly must be purchased every morning...or else.

But what about the supply of coffee??

Surprisingly, there is a large supply of coffee beans grown and then imported into the United States. This accounts for the relatively  low cost (input price) to produce the venti skinny vanilla latte with a pump of carmel and light on the foam that I order every morning.

HOWEVER, because Starbucks has market power, they are what we call "price-makers" and can make large profits. Their coffee is highly demanded and consumers are willing to pay high prices. Therefore they charge a much higher price than the actual average total cost per cup of coffee.