Page 53 - bne IntelliNews Country Report: Russia Dec17

would become an increased burden on the entire population, leading to higher inflation.
A reduction in mandatory pension payments would in turn make the Pension fund of Russia even more dependent on the state budget, which contradicts the main principle of a pension reform of the 2000s.
However, as the funded portion of pension contributions has been “frozen” for four years running, the pension reform seems to have failed anyway.
Some other proposals for amendments to the tax system were rejected at earlier stages of discussion, including the introduction of a sales tax.
Russian business representatives are concerned by the raising tax burden and addressed an open letter to the President Vladimir Putin on November 20, Vedomosti daily reported citing the letter signed by four unions and associations.
For years the high tax burden has been named as the number one reason limiting output growth in the business confidence surveys and businesses are alarmed over new tax regulations creeping into the 2018 federal budget.
Putin signed a moratorium on increasing the tax burden in 2014 in effect until 2018, but the de-facto situation deteriorated due to fees, duties and other levies that are not formally taxes. The government has been short of cash to fund a budget deficit for the last two years and is casting about for new sources of revenue, but remains reluctant to hike the low levels of income tax. "We recently mentioned the fears in the business community over the cabinet plans to reintroduce tax on movable assets into the 2018 budget draft aimed at raising at least RUB70bn ($1.2bn)," Alfa Bank reminded on November 20.
On top of the movable assets tax, the government could also introduce other obligatory payments for equipment imports; recycling fees (at a rate of 7%); and investment fees at seaports (at a rate of 25%).
Vedomosti estimates the additional taxes will raise a fresh RUB100bn ($1.7bn) for the budget in for 2018, while Alfa puts the total fiscal effect to as high as RUB300bn (1% of the consolidated budget revenues), while noting that "the Finance Ministry may have serious reasons to insist on them."
The authors of the letter to the president warn that all the new collections will inevitably chip away from investment growth across all real sector segments. Machinery imports account for over 40% of Russian imports and is directly correlated to investment in capacity.
Industry participants surveyed by Vedomosti argue that while the latest economic outlook by the government is targeting growth in investment, such measures are discouraging investment activity. Other experts note that fiscal predictability could be even more important for businesses than low taxes.
"Regardless the immediate reaction of the President [to the letter], after the presidential elections the cabinet will have no choice and will proceed to move ahead and increase the tax burden," Alfa believes.
The intention to increase the tax burden on business is an indication that after
53 RUSSIA Country Report December 2017 www.intellinews.com