Russian businesses expecting another round of tax hikes

Moscow — Russian businesses accept that another round of tax hikes is inevitable as the government seeks to rein in a ballooning budget deficit but they want more predictable fiscal policies, the head of the country’s top business lobby said on Tuesday.

The costs of the conflict in Ukraine have placed growing strains on state finances. A government document seen by Reuters in August showed Russia has doubled its 2023 defence spending target to more than $100bn, or a third of all public spending.

The Russian government has already raised taxes, including introducing a one-off windfall tax on big business, aimed at raising 300-billion roubles ($3.34bn) to help finance the budget deficit.

It also hiked mineral extraction taxes on the energy sector and imposed export duties linked to the rouble-dollar exchange rate from October 1.

“We are ready to discuss with the government the issue of increasing income tax, provided that there are intelligible, clear and fairly systematic investment tax deductions,” Alexander Shokhin, head of the Russian Union of Industrialists and Entrepreneurs, told a financial conference.

“We understand that the tax system ... cannot remain unchanged, but we need some formulas that will allow both the finance ministry and business to understand how the tax situation will change when certain conditions vary.”

Last week Russian businessmen meeting with President Vladimir Putin proposed that any increase in income tax be accompanied by greater
long-term predictability in fiscal policy, Vedomosti newspaper reported, citing unnamed sources.

“Business understands that the exactions will continue. This is an attempt to conclude a gentleman's agreement — we pay more, but there are no unexpected changes in the near future,” a source familiar with the discussions said.

Reuters