MOSCOW, Nov 21 (Reuters) – Russian businesses accept that another round of tax hikes is inevitable as the government seeks to rein in a ballooning budget deficit. However, 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 over $100 billion, 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 ($3.34 billion) 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 Oct. 1.
Alexander Shokhin, head of the Russian Union of Industrialists and Entrepreneurs, told a financial conference that his organization is ready to discuss with the government the issue of increasing income tax, provided that there are intelligible, clear and fairly systematic investment tax deductions. He emphasized that while businesses understand that exactions will continue, they need some formulas that will allow them to understand how their 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: “Business understands that 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.”
($1 = 89.7230 roubles)