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For companies, the federal government is planning to expand an investment support mechanism in the form of tax deductions, which is currently available as a regional tax instrument. The stated goal is to support investment into technological development. At the same time, it would expand the list of companies that can make use of simplified taxation and guarantee that the tax system remains stable for the following years. All this is likely a sweetener for an eventual considerable corporate income tax hike. Alexey Repik, the head of business association “Delovaya Rossiya,” suggested that, depending on the investment support mechanism, the tax rate could be raised from 20% to 30%. While the federal budget shares corporate tax receipts with regions, it is likely that most or all of the extra income would benefit the federal budget and, at least according to Siluanov, will be spent on social policy.
Regions, on the other hand, would be encouraged to tax land and luxury items more heavily to shore up their own sagging incomes. This proposal also gained support from Andrei Makarov, the head of the Duma’s committee on taxes and the budget. Earlier, the government suggested that regions should set up committees to fight illegal employment (however, these bodies would simply collect information and share it with the Federal Service for Labor and Employment).
Siluanov also confirmed that the government would not raise the VAT rate, as this would increase inflationary pressure on the economy. Since inflation is still higher than what was expected by the Central Bank, the Bank will also consider raising, rather than lowering, its key rate at its next Board of Directors meeting on June 7. The last time that the bank raised its key rate was in December 2023.
111 RUSSIA Country Report June 2024 www.intellinews.com