Page 67 - RusRPTNov19

Moscow is looking to expand to 13 new regions
new tax regime for self-employed people , Finance Minister Anton Siluanov
said on October 22. On January 1, self-employed individuals in four regions
(Moscow, Moscovskaya oblast, Kaluga, and Tatarstan) will see their
professional income taxed at 4% (for services to individuals) or 6% (for
services to legal entities), an attempt by the authorities to lift part of the
Russian economy out of the shadows. 240,000 people have already registered
as self-employed in the four regions, according to Siluanov, and the
government is looking to expand the legislation to the entire country by the
second half of 2020. One obvious weakness of such a tax regime is that
companies will be tempted to register some of their employees as
self-employed in order to reduce their taxes, something the Federal Tax
Service said it would combat using “big data technology.”
Tax benefits to oil companies have more than quadrupled since 2011 , the Ministry of Finance revealed in a discussion of the 2020-22 budget. But the companies are not using the extra funds to invest. MinFin sees this trend as a key factor in the projected decline in federal budget revenues, from 18.1% GDP in 2020 to 17.2% in 2022. The Ministry of Energy, unsurprisingly, disagrees.
● Whereas tax benefits to oil companies amounted to RUB375bn rubles in 2011, today they are RUB1.6 trillion.
● Over the past six years, the share of oil produced under preferential tax terms has more than doubled, from 26.7% in 2013 to 56.6% in the first quarter of 2019.
● Yet at the same time, investment in the oil industry has only grown by about 33% (from 2014-18), and the volume of production has not meaningfully changed, fluctuating around 490mn tons a year.
● This means oil companies are not using their increased profits to generate new projects and increase production, but rather to buy back shares, pay dividends, and repay loans.
● MinFin projects that by 2033 the share of tax privileged production will grow to 90%, and the budget will lose RUB2.3 trillion as a result.
The Ministry of Energy disagrees, projecting the share of preferential oil production to hit 79% in 2035, but arguing that the benefits pay for themselves: RUB1 trillion worth of tax benefits brought RUB1.7 trillion back to the budget, the ministry calculates.
The Russian government may cut its share in national airline Aeroflot to half in the next two years , as the next step of a plan to restart the stalled privatisation programme and eventually reduce the state’s holding in the national carrier to a quarter. Russia’s Ministry of Economic Development may offer a 1.17% minority stake in national air carrier Aeroflot to private investors by 2022, Kommersant daily reported on October 18.
The state controls 51.17% in the carrier, 35.7% is held by institutional investors, 3.5% by state technology agency Rostech, 5.1% by private investors, 4.3% is a treasury stake, and 0.1% is held by the management of Aeroflot. Previously in the botched privatisation efforts of 2014-2016, the state already planned to cut the participation in Aeroflot to 25% plus one share.
As reported by bne IntelliNews, the Russian government could cut state's shares in RusHydro hydro energy major (61.2% state stake), Transneft oil pipeline operator (78.55%), Sovkomflot maritime shipping (100%), Rosseti grid operator (88.04%), Rostelecom integrated telecom major (45.04%), and United Grain Company grain exporter (50% plus one share).
a pilot project creating a
67 RUSSIA Country Report November 2019 www.intellinews.o