Page 53 - RUSRptSept18

part of its process of systemizing non-tax payments, the Ministry of Finance is proposing a new environmental tax to replace the current fee for damage to the environment. They hope that the new system will combat fee non-payment and boost the federal budget. The Ministry of Finance continues to make proposals that are probably aimed at increasing the power of the federal centre over revenues in place of local governments. Increasing tax compliance is good. Increasing political control over budget spending is better. A de jure tax for polluters will undoubtedly be applied selectively and existing budget appropriations may be spent unwisely or else not at all. The Ministry of Finance insists that the new tax will not increase the current burden on taxpayers. It will tax the same activities currently covered in the fee—atmospheric emissions and dumping waste into water—and tax rates will not change much from the current fee schedule. In fact, MinFin believes that since the current fee operates as a de facto tax, it should become one de jure. This will increase payment compliance, as non-payment for pollution fees carries no criminal liability, which makes them virtually impossible to enforce. Business and regional authorities, however, have several concerns about the proposal. First, it is unclear how the tax revenue will be distributed between the federal and local budgets. In its current form, the bill may deprive regions of the revenues that they rely on to compensate for environmental damage. Second, the Russian Union of Industrialists and Entrepreneurs worries that payments previously earmarked to combat environmental damage are now unlikely to be spent on this purpose.
Oligarchs are nervous after the presidential economics advisor Andrei Belousov suggested taking some RUB500bn from the leading commodities producers by introducing a special windfall “super tax” that taxes excess profits these companies make if commodity prices rise. Now they are reacting. Leading Russian steel mill Severstal says it may reduce its investment program, instead of doubling it if the super tax is introduced, according to Interfax citing the letter of the main shareholder of the company Alexei Mordashov to the minister of industry and trade of Russian Federation Denis Manturov. The proposal to average EBITDA of metallurgical companies to the weighted average EBITDA margin for oil and gas companies (22% in 2017) "will not only deprive metallurgical companies of motivation to improve operations, but also encourage companies with low profitable foreign assets, as their average profitability is lower, while companies that develop production in the Russian Federation are punished," according to Mordashov, who was also included in the US sanctions lists. This measures will lead to a significant decrease in the competitiveness of Russian metallurgy in the world market, Mordashov noted. Like so many radical reform ideas in Russia, analysts believe that Belousov’s letter is not a plan, but the opening salvo in a conversation about how the cash-hungry state can raise some fresh revenues from its very profitable but largely privately owned commodity producers. “We reiterate our view that some taxation is possible but unlikely to account for more than 20% of profits,” BCS Global Markets analysts said in a note.
Self-employed workers may not have to pay insurance. In the latest attempt to bring self-employed workers out of the shadows, officials plan to introduce a new 4% tax for the self-employed that will free them from almost all insurance payments. Of the 4% tax, 1.5% will go to the Compulsory Medical Insurance Fund, and the rest will go to the local budget. Pension Fund contributions will become voluntary. The Ministries are working up a means of classifying the self-employed as legal enterprises and to essentially remove them from the labor codex. Further, making contributions for the self-employed to the National Pension Fund optional will undermine the pension system and likely encourage people either to not save or to under-save. Many are self-employed in order to dodge taxation and high business costs as it is. New taxes are never popular, but the current proposals would allow people to save money on insurance payments, a carrot to draw their labor out of the shadow economy. The question of pension payments for the self-employed remains up for debate. By the current plan, individuals will have the option to either
53 RUSSIA Country Report September 2018 www.intellinews.com