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Rushing to the doctor? — An increase in revenue from fines and confiscations

Photo: https://ij.org/
According to a report on the website of the Russian Business Consulting (RBC) newspaper on October 29, a Russian court fined Google much more than the total global GDP, up to 35 figures. (the International Monetary Fund estimates that the total global GDP is about $110 trillion). This fine is the result of four years of accumulation. According to the report, in 2020, Google’s video platform YouTube was punished by a Russian court for illegally blocking the accounts of several Russian media outlets. The court ordered Google to reinstate the banned Russian media account and issued a fine of 100,000 rubles. According to the ruling, if the fine were not paid within 9 months, the penalty would be doubled every day and there was no upper limit. Although this is a symbolic fine, Russia’s confiscated revenues deserve our attention.

Revenue from fines and forfeitures is a form of fiscal revenue. The judicial, public security, administrative, customs, or other economic management departments of the State shall impose fines or confiscated proceeds for violations of laws, decrees, or administrative regulations, as well as the proceeds from the sale of stolen goods recovered by various departments and units.
For the first time in Russia’s 2025 budget, plans to collect fines from individuals and businesses to fill the budget. Since next year will have to spend about half of the fiscal revenue on the war, in the draft budget of the Russian Ministry of Finance, it is planned that a record 592.7 billion rubles in fines, sanctions, and damages will be received in 2025-2027. 
Mainstream economists and legal experts agree that public institutions should not have forfeiture revenue plans. This is because once a plan for forfeiture revenues is in place, it will force law enforcement agencies and law enforcement officers to enforce the law strictly, increase the penalties for illegal acts, and thus seriously damage the business environment. At the same time, law enforcement agencies and law enforcement officers will be induced to abuse their power to meet the revenue targets of fines and confiscations through illegal or phishing law enforcement. Although budgeting forfeiture revenues is an act taken by a minimal number of, under the impact of the epidemic and war, some governments have launched “fine revenue generation” due to increasingly tight fiscal budgets.
From the perspective of fiscal revenue structure, it is mainly divided into tax revenue and non-tax revenue. Among them, tax revenue is an important source of government fiscal revenue, while non-tax revenue mainly includes administrative fees, government funds, state-owned capital operating income, fine and confiscation income, franchise income, etc. Generally speaking, the higher the proportion of tax revenue, the higher the quality of fiscal revenue.
For instance, in China, after the Ministry of Finance released the national fiscal data for the first half of the year in 2024, the rapid growth of non-tax revenue has aroused widespread heated discussions in public opinion.
In the first half of 2024, non-tax revenue was 2,183.3 billion yuan, a year-on-year increase of 11.7 percent. As a component of non-tax revenue, the revenue from fines and confiscations is a special means of fiscal revenue, and it has indeed shown a relatively obvious growth trend in recent years, especially after 2020.
The unreasonable increase in forfeiture revenues reflects the financial difficulties of local governments, however, the unrestricted collection of forfeiture revenues will only lead to the destruction of the business environment, which will affect the future development of the national economy.
On October 8, at a press conference held by the Information Office of the State Council of China, the director of the National Development and Reform Commission, said that it is necessary to further standardize the administrative law enforcement behavior of administrative law enforcement units, adopt more inclusive and prudential supervision and soft law enforcement methods, and cannot enforce the law in violation of regulations and seek profits. All in all, the hidden financial dilemma and irrationality behind the forfeiture revenue and its disruption to the market deserve our attention.
By Le Tianyu

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