Budget filled with fines

An event led me to do more detailed research on this topic. When I tried to change my driver's license, they told me that there were many fines on the car I was driving. I was surprised because I drove the car with a belt and, in most cases, at a low speed. Indeed, the driver will initially be fined 45 AZN for the expiration of the compulsory insurance contract. The driver will be fined another 45 AZN every 20 days until he/she renews the contract. Thus, these amounts are collected if the driver is either unaware of the requirements of this law or does not pay on time. Unless a driver enters the online system and checks the penalty points, or if the penalty points do not come to his mobile phone (That's what happened to me), he/she has to pay a fine of 810 AZN per year for this article alone. It is not difficult to calculate how much money was collected from 1.3 million drivers on the basis of various offenses or negligence. When such a large amount of fines is added on several articles, it turns out that hundreds of millions of manats of fines were collected.

Fines are not limited to driving. There are many sources of fines, such as the use of masks associated with the coronavirus, crossing prohibited areas in traffic, and so on. In Azerbaijan, the fight against coronavirus was carried out more than administrative methods, perhaps at the expense of financial penalties. There is also an important behind-the-scenes goal, such as taking care of the health of citizens with high financial penalties: to fill the state budget with fines!

The experience of many countries has shown that during the pandemic, state budgets were drastically reduced. As the expenditures increased and the burden of citizens falls on the states, governments are looking for sources to cover those expenditures. In Azerbaijan, the opposite process took place. In our country, the gap in the state budget is more bridged by fines due to the pandemic. This should be written in the series of Azerbaijan's uniqueness!

Fines cannot be predicted!

Let's look at the sources of these fines. Among the changes made in the state budget for 2020 are receipts from fines. Such that since more funds are collected from the amount received from fines, the funds collected will be used for expenditures. Such that while the state budget approved in December provided for 10 million AZN from fines, it collected 6.9 million AZN (16.9 million AZN in total). It was just money received from citizens. But there are other fines in the receipts. The amount of funds received by the budget from the sale of the property on the basis of decisions of judicial authorities determined by the investigation is not small. The funds from these fines are projected at 30 million AZN.

Dear ministers, you need to know something. It is not possible to predict what percentage of the state budget revenue will be formed from fines or financial sanctions. Because this is not a predictable situation. Can we predict when we will die and when we will get sick? The same goes for financial penalties. How many people are fined per year and in what amount they are fined can only be considered as an additional contribution to the source of revenue of the state budget. Because fines cannot be a fiscal target!

Our fiscal institutions have simply set a high fine limit and are pursuing a policy of "shearing eggs" to raise funds to ensure access to that target. Only if for some reason the number of violations increases and the budget has more funds than expected, it can be diverted to expenditure later. The Azerbaijani government has set a goal and limit for the fine and is motivating it. This is a cause-and-effect mismatch. This is one of the next differences between you and us in our views on fiscal policy.

Fines: a means of regulation or a source of income?

The philosophy of being fined is this: a person corrects his illegal behavior by paying a fine for the offense. This fine is not only paid because it is a source of income but also paid because it creates value. This means that the main legal goal is to bring one's behavior into line with the legal dimension by paying more money.

On the other hand... Why should fines be so interesting for government agencies or inspectors? There is a simple reason: the inspector (tax, customs, police) who draws up the penalty protocol, has the opportunity to pay extra to his salary by doing this. Such that in the bodies included in the classification of Extrabudgetary Development Funds (Ministry of Taxes, State Customs Committee, MIA), the amount of 20% of the fines is added to the monthly salaries of inspectors. Therefore, the number of those fined and the amount they pay increase from year to year, month to month. There were even days when about 400,000-1,000,000 AZN were collected from fines. According to the Ministry of Internal Affairs (MIA), 3,800 people were fined in the last day (April 5-6) due to control measures carried out in the fight against coronavirus. According to the Code of Administrative Offenses, people were fined from 100 to 2,000 AZN (https://banker.az/bir-sutkada-karantin-rejimi-pozanlardan-380-000-manat-cərimə-toplanib/). In this case, it is clear how much money is earned in the state budget (this is a mystery) in millions of manats, not only monthly but also during the day.

The economy is formed at the expense of fines. It can also be called a penalty economy. It seems that we are getting closer to the Dubai model. An expensive city, big "elephant" projects, dazzling decorations, and a "paradise" country fed by fines from citizens...

Last word

One of the tools used to regulate public life is financial sanctions. However, if these fines serve a fiscal purpose rather than enlightenment, then the purpose is not to reduce social tensions or to enlighten but only to gain income. In fact, when financial sanctions were imposed, the goal was not to make a profit but rather to create value. In the 19th century, Adam Smith, known in economics as the "father of liberalism," wrote in The Wealth of Nations: "The basis of freedom of economic activity are peace, easy taxes, and a tolerable administration of justice." Legal science has proven that high fines and harsh bans have led to an increase in crime in most cases, not a decrease. The situation seems even more mysterious when the urge to eat forbidden fruits is added to these problems...