UPDATE: PM: Russian needs no serious reforms, ‘16 budget adjustments

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MOSCOW, Apr 19 (PRIME) -- The Russian economy needs structural reforms but any dramatic changes will take their toll on people and can prolong the crisis for years, Prime Minister Dmitry Medvedev said on Tuesday during a meeting with lawmakers, adding that despite worrying signals earlier this year, the 2016 budget plan does not need adjustments so far.

“Yes, the country needs deep structural reforms. The government is well aware of that. But it understands how it will reflect on the social sphere. Any forced changes could strengthen and prolong the crisis phenomena for several more years. We will not go for reforms which take a toll on people,” Medvedev said.

“We have managed to avoid the 2016 budget correction as well, despite this seemed unavoidable in the year’s beginning. We do not plan to introduce amendments to the budget in the spring session (of the parliament, lasting until July),” Medvedev said.

The prime minister said he signed an order for state-run companies, stipulating payment of at least 50% of net profit in dividends to raise 100 billion rubles of additional funds for the budget in 2016, he said.

The government will also tighten screws over spending of state companies. Authorities will even analyze the salaries of executives, Medvedev said.

The country’s authorities will not start printing more money though the economy lacks it because this measure will undermine the income of households, Medvedev said. On the other hand, a proposed return to Soviet-style state-controlled economy will hurt business. Nationalization of large companies is “effective only as a propaganda tool,” he said.

Taxes will not be raised until 2018 in order to prevent salary schemes to escape the payroll tax, and capital outflow, Medvedev said. “Nowadays, when the oil price has fallen, there is a temptation to increase budget revenue by raising taxes. But our position has been fundamentally different. Taxes are not to increase until 2018.”

The government will improve the system of control over businessmen to minimize the amount of unnecessary checks, he said. The business rule compliance checks were suspended in 2015 after multiple reports that the system was used in takeovers.

According to Medvedev, authorities will come back to 3-year budget planning after 2016. The government will try to keep the budget deficit at up to 2.4% of Russia’s gross domestic product (GDP), which is an “economically safe level.”

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