Russians asked to pay up for the World Cup
July 11, 2018
These days, Russians' interest in football outshines everything — including concerns over drastic pension reforms. That's according to the Levada Center, an independent polling organization in Russia. The enthusiasm is understandable: The Russian national team unexpectedly made it all the way to the tournament's quarterfinals before exiting with a loss to Croatia on penalties.
Yet, even the departure of the Sbornaya has not dampened the mood of Russian fans. Rather than frustration, Russia has been gripped by a mood of thankfulness for the team, which gave everything it had throughout the tournament.
But all of that will end when the World Cup wraps up on July 15. The international fans will head home and Russians will once again be confronted with the struggles of everyday life. At that point, unpopular government reforms that threaten the already-tanking prosperity of Russian citizens will likely come back into focus.
Higher taxes, slower growth
No one expects dynamic growth from the Russian economy for 2018. The government's Ministry of Economic Development has trimmed its prognosis for growth for the year from 2.2 percent to 1.9 percent of GDP. And the economy is slated to slow further still in 2019: Official estimates are currently at 1.4 percent. One obvious reason for that negative trend was the government's decision to raise the country's value added tax (VAT). Russia's parliament, the Duma, passed the proposal on its first reading. Thus, VAT is scheduled to increase from 18 percent to 20 percent, effective January 1, 2019.
The Ministry of Economic Development itself has even said that the hike will be a drag on growth and will speed inflation. The situation is made all the worse by the fact that wages have been stagnating for the last four years. Nevertheless, the move promises to add some 620 billion rubles, or roughly €8.4 billion ($9.9 billion), to Russian state coffers next year alone. That is a sum comparable to the total amount spent on hosting the World Cup. Official statistics say the tournament cost Russia some €9.21 billion.
Delayed retirement a boon for the state
But the reforms don't end there. While fans were busy watching the World Cup kick off, the Russian government announced another financial burden for citizens by raising retirement ages across the board — from 60 up to 65 for men and from 55 up to 63 for women. The plan offered few details, only that the age would be raised incrementally: from 2019 until 2028 for men and by 2034 for women.
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One supporter of the plan, Alexei Kudin, the supposedly liberal leader of the Accounts Chamber of Russia, estimates that raising the retirement age will mean the Russian government will see income increases totaling as much as 100 billion rubles annually between 2019 and 2024. Russian Labor Minister Maxim Topilin has promised that a portion of that money will be used to increase pension benefits. Russian pension payouts currently average about €200 a month.
The government's reform plans have been rather unenthusiastically received by citizens and as a result the popularity of President Vladimir Putin and other leading politicians has dropped considerably. That is one reason observers believe the reforms will be watered down as they make their way through the Duma before becoming law.
Higher prices already being charged
The changes to retirement age and the VAT would most likely have happened with or without the World Cup. But Russian citizens are already paying higher prices for other services, including acquiring government-issued documents. Previously, a citizen had to pay about €50 for a passport; now they cost €70. A driver's license cost less than €30 until recently; now the price is more than €40.
Moreover, additional costs paid out centrally to formerly state-run corporations will also be going up by an average of 4 percent.