• Wed. Dec 6th, 2023

Russian Businesses Brace for More Tax Hikes, Lobby Group Calls for Predictability


Nov 21, 2023

Russian businesses are preparing to accept another round of tax hikes as the government seeks to address its growing budget deficit, but they want more predictable fiscal policies, the head of the country’s top business lobby said on Tuesday.

The conflict in Ukraine has put significant strain on state finances, with Russia doubling its 2023 defense spending target to over $100 billion earlier this year. This represents a third of all public spending. In addition to this, the government has already raised taxes, including introducing a one-off windfall tax on big business aimed at raising 300 billion roubles ($3.34 billion) to help finance the budget deficit. The government also hiked mineral extraction taxes on the energy sector and imposed export duties linked to the rouble-dollar exchange rate from October 1st.

Alexander Shokhin, head of the Russian Union of Industrialists and Entrepreneurs (RSPP), told a financial conference that his organization is ready to discuss increasing income tax with the government, provided that there are intelligible and clear deductions for investment purposes. “We understand that the tax system cannot remain unchanged,” he said. “However, we need some formulas that will allow both the Finance Ministry and businesses 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. A source familiar with the discussions told Reuters that businesses understand that taxes will continue but are seeking greater clarity about future changes in fiscal policy. “This is an attempt to conclude a gentleman’s agreement – we pay more, but there are no unexpected changes in the near future,” he said.

Leave a Reply