Post-Crisis Fiscal Revenue Developments in Russia: From An Oil Perspective

Abstract

This paper examines the level and trend of fiscal revenues in Russia in the post-crisis period, focusing on the oil sector's contribution to higher tax revenues and the role of tax reforms. We estimate that about 80 percent of the total post-crisis gains (about 5 percentage points of GDP) in the revenue of the general government came from the oil sector. Although effects of tax reforms and oil prices are difficult to disentangle empirically, our detailed tax-by-tax study indicates that high oil prices accounted for most of the revenue gains; tax reforms played a secondary role by making the tax regime more elastic to oil prices. This assessment is corroborated by our cross-country comparison, which shows that the Russian revenue performance in the post-crisis period does not differ from other oil exporting countries. Similarly, our counterfactual analysis illustrates that lower oil prices are likely to cause far more revenue losses to Russia than they did in the pre-crisis period. These findings challenge the notion that the post-crisis revenue gains are largely irreversible due to successful tax reforms, political stability, and economic growth, and highlight the need for measures to help shield the budget against oil price volatility. [JEL: E62, H20, P27, Q43]