The Transportation Ministry wants to return to the use of separately administered funds to pay for road construction, but the Finance Ministry opposes the idea, saying it would lead to corruption and be impractical to finance.
Transportation Minister Igor Levitin said Wednesday that the proposal to create road funds had been submitted to the government. In December, President Dmitry Medvedev ordered that the proposals be drafted, said Svetlana Kryshtanovskaya, an aide to Levitin.
This would not be the first time that Russia has financed the roads industry through specialized funds. In 1991, the Supreme Council of still-Soviet Russia approved the law on road funds, which pooled money raised from a variety of transportation-related taxes.
In 2001, the federal road fund was liquidated after the government decided to switch to direct budget financing. With the cancellation of road tolls Jan. 1, 2003, the regional road funds were also eliminated.
"There were a great many instances of theft from the road funds," a Finance Ministry official said. "It's a very corrupt sector, a real trough for regional officials."
During the early 2000s, a number of officials were arrested on suspicion of stealing from the funds, including Irkutsk Deputy Governor Sergei Voronov, Smolensk Deputy Governor Yury Balbyshkin and Viktor Burov, the Kaluga region's roads minister. Eliminating the funds was a colossal effort because of resistance from the regions, the Finance Ministry official said.
Kryshtanovskaya conceded that the funds were sometimes misused, but she said their elimination led to a chronic deficit of financing for new roads. "In 2000, the state spent about 2.9 percent of gross domestic product on roads, but in 2005 it was 1.1 percent," she said.
The Transportation Ministry is proposing to create road funds at the federal, regional and municipal levels, which should accumulate money for the construction, renovation and maintenance of public roads, Kryshtanovskaya said.
Last year, 328 billion rubles ($11.2 billion) of federal money was spent on roads, and in 2010, 274 billion rubles has been allotted. Road funds would make it possible to sign 12-year contracts — the time until the first scheduled road renovation — for the construction and maintenance of motorways, Levitin said. Currently, contracts can be for no more than three years.
The federal fund would raise money from import duties on cars and tires, valued-added tax from the sale of imported cars and other tax revenue, Kryshtanovskaya said. Trucks weighing more than 12 metric tons would pay to use public roads; roadside stores, cafes and gas stations would be taxed; and payment would be required to install billboards or other infrastructure along the road. The fund could also be used to finance Avtodor's construction of toll roads, she said.
The Transportation Ministry wants to finance the regional funds with the transportation tax and excise taxes on fuel, valued-added tax on the sale of fuel, tires and Russian-made cars, as well as an 8.3 percent tax on profit, Kryshtanovskaya said. The municipal funds would get half of the land tax, plus payments for rented land and part of individuals' communal services payments.
Medvedev will hold a meeting on roads policy soon, and the proposal will be discussed, an official in the presidential administration said. The proposal could use some work, said an unenthusiastic source in the Cabinet.
"There are no painless taxes that could be paid into the road funds," the Finance Ministry official said.
The proposal does come with risks, said Sergei Belyakov, head of the Economic Development Ministry's investment policy department. "For example, the risk of underfunding other parts of regional budgets," he said.
The Budget Code does not allow specific revenues and expenses to be linked, said Sergei Aristov, the Tver region's economic development minister. But he said he liked the ministry's proposal, since it would clarify the sources and volumes of road financing.
In 2010, the Tver region will spend about 2 billion rubles ($68.5 million), or 6 percent of its budget, building, renovating and maintaining roads, Aristov said.
Kryshtanovskaya said the regions, in particular, did not have enough money for their roads. "In 2009, revenue from regional budgets from the profit and transportation taxes and excise taxes on fuel were forecast at 332 billion rubles, while the regions needed 1 trillion rubles in roads funding," she said.
The idea might work out, since there really is a shortage of money, said Ilya Rachkov, a partner at law firm Nörr Stiefenhofer Lutz. The road funds were discredited in the 1990s, but that does not mean the idea itself is bad.
It would be easier and more effective to oversee the roads money through funds, said Senator Vladimir Fyodorov, former head of the traffic police.