The good news for Russia’s military personnel is that the government has promised to pay most of their back wages by the end of the year. The bad news for the Defense Ministry is that it will have to pay for this largesse from other programs. Finance Minister Aleksandr Livshits, also a deputy prime minister, said on Saturday that July wages would be cleared up by the end of this month while in November and December the government would pay the debt for August along with the normal wages for those months. However, he said that these payments would be made "at the expense of other parts of the defense budget." Livshits admitted that the government would still owe the troops their September wages as well as a year-end lump-sum bonus of 3 month’s pay. These debts would be cleared up during the first quarter of next year, he promised. (Itar-Tass, October 12 1996)
Not getting paid has been one of the most humiliating and demoralizing aspects of recent military service, forcing officers to drive taxis and take other illegal moonlighting jobs to feed and house their families. But while Defense Minister Igor Rodionov certainly will applaud the fact that his personnel will finally get paid, he must be shuddering at the thought of finding the money to pay this new bill. Military officials have repeatedly cited a whole litany of financial shortfalls in the budget. Not only is there no fat in these budgets, they argue, little of the muscle is left.
President Boris Yeltsin has directed his government to solve the military’s financial problems. The first plan mooted calls for a 2 percent special increase in the value-added tax (VAT), which is predicted to raise some 25 trillion rubles for the military in 2 years. This Defense Ministry idea reportedly caught the Finance Ministry and the State Taxation Service by surprise (Segodnya, October 11 1996.) With tax evasion a Russian art form, the VAT currently provides 40 percent of the government’s tax revenues. And these revenues repeatedly fall far short of the government’s estimates. (Delovoi mir, October 11-17 1996.) However, it is becoming clear to everyone that something extraordinary must be done. Livshits said the decision on a special tax for the armed forces was likely to be "very hard," but Rodionov would surely say such hard decisions are long overdue.
Pleading Poverty: Border Forces Stake Their Claim.