Falling Tax Compliance and the Rise of the Virtual Budget in Russia

Brian Aitken
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Brian Aitken: International Monetary Fund

IMF Staff Papers, 2001, vol. 48, issue 4, 9

Abstract: The decline in cash revenue in Russia has been the key macroeconomic policy failure of the transition. During 1994-98, a sharp deterioration in cash compliance was offset by a rise in non-cash revenue, as the government increasingly financed its spending through mutual arrears write-offs. This paper argues that the fall in cash compliance emerged when money printing was replaced with a method of budget financing that did not, in the short run, compromise the government's goals of low inflation, a stable exchange rate, and low interest rates, but which ultimately has led the government into a low cash revenue trap. Copyright 2002, International Monetary Fund

Date: 2001
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