THE World Bank's Russia Economic Report (RER) has pitched fuel taxation reforms before the authorities for execution over the medium to long term. Prepared last month, RER is produced twice a year by World Bank economists.

As put by RER, "In the medium- to long- term, and with the necessary political backing, it would be important to increase fuel excise taxes and differentiate tax rates by the social and environmental cost of fuel use. Exploring the use of carbon taxes or other forms of carbon pricing harmonized within broader trade and technology agreements with prospective trading partners would also help".

The reforms should encompass elimination of non-transparent subsidies to producers and consumers. These can be regressive and distort incentives for efficient consumption. Authorities should consider replacing them with more targeted cash transfers to the poor and vulnerable, RER says.

According to RER, "Rebalancing the portfolio and mitigating the risks of stranded assets will require Russia to diversify its wealth portfolio away from its fossil fuel sector and towards other productive capital. However, Russia continues to depend on underground fossil fuel assets to generate a significant share of export revenues. In 2018, energy exports accounted for 65 percent of total exports (compared to 59 percent in the previous year). Other types of natural capital, such as minerals and timber products also play an important role "

The Report continues: "Furthermore, the structure of produced capital is skewed towards those are close to fossil fuels and require related skills, such as refining and heavy industry, including metals, chemicals and related equipment. This asset structure makes the Russian economy vulnerable to the structural impact of international, regional, and domestic efforts to address climate change, biodiversity, air and plastic pollution. The impact can manifest through technology and policies that reduce demand for fossil fuels and policies that can restrict market access to industrial products with high environmental footprint ".

It has noted that the country's Macro-fiscal buffers remain strong. Russia has had twin fiscal and current account surpluses (5.0 percent of GDP and 4.7 percent of GDP in the first nine months of 2019, respectively). Now at 28th place, Russia continued its advance in the latest World Bank's Doing Business ratings.

Paying taxes was made easier by reducing the tax authority review period of taxpayer applications for value added tax cash refunds and by further enhancing the 1C software used for tax and payroll preparation.