Within recent years the Russian economy has been in free fall and there are a multitude of reasons as to why this crisis is happening. Low oil prices, lack of diversification, economic sanctions, EXTREME wealth inequality, corruption, etc., however, some speculate that the worst may soon be over for the former Soviet state. Here are two articles of differing opinions:
https://www.project-syndicate.org/commentary/crony-capitalism-hurting-russian-economy-by-anders-aslund-and-simon-commander-2016-05
https://www.rt.com/business/342464-russia-economy-growth-forecast/
It's important to note that the second one was written by RT.com, a website funded by the Russian government, however, my intent isn't to create a strawman, rather to introduce an insider source. What are your thoughts on the future of Russia? Does this crisis impact the rest of the world and if so, how?
Russia has not done a good job diversifying their economy. But they have enacted a 13% flat tax that has actually brought in more revenue than their old progressive tax system.
ReplyDeletehttp://www.tradingeconomics.com/russia/personal-income-tax-rate
Do you have any information on the old tax system? I could only find information on here about their current flat tax on the source you gave. What were the marginal tax rates? How much revenue was it bringing in? How much did revenue change with the switch? Maybe I'm just not using the source correctly but I couldn't see any of those things on there.
DeleteThat seems really strange to me since Russia is notorious for giving special privileges to an elite minority. Even if it generates more revenue, is it really doing anything for the near oligarchy?
DeleteI think the first article is much more realistic view of Russia and I think they bring up two major issues that Russia must address in the future to help their economy. Firstly the low labor productivity and lack of foreign and domestic investment and important issues that must be addressed before Russia can even be considered to be rebounding. Secondly I find the lack of transparency by state owned companies very worrisome.
ReplyDeleteI also find it interesting that the second article by the RT.com more or less just predicts that things are not that bad and they will get better without providing any detailed answer of how their economy will bounce back
Kenny, I'm curious as to the effect on wealth distribution, if any, that the 13% flat tax has had on the Russian population. As Jay points out, this is a major problem for the country, so I'm wondering if policymakers kept this in mind when they decided to implement this tax system over a progressive one, or if they were just trying to increase revenues.
ReplyDeleteIt's very interesting to see the contrast between the two articles, they're like night and day. The citizens of Russia must feel some degree of anger toward media outlets such as the second. They are the ones actually living and experiencing the poor economic situations, while these websites are spinning it all in a positive light.
ReplyDeleteAlso, I'm very surprised to see that the 13% flat tax was capable of increasing tax revenues. It seems exceptionally low. Looking at the data, they do seem to have high levels of tax outside of income tax. Perhaps this is the reason for the tax revenue increases.