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IMF Staff Papers Logo Last updated: May 2002
Volume 48, Special Issue
Falling Tax Compliance and the Rise of the Virtual Budget in Russia
Brian Aitken

Full Text of this Article (PDF 144K)

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. [JEL: H26, H30, E62, E65, O23]

© 2001 International Monetary Fund