Page 18 - RusRPTMar23

2.4 MinFin hitting up big business for more tax cash
The Russian government is facing a growing budget deficit and is looking for ways to raise revenue. For the first time since Russian President Vladimir Putin took office the government is discussing raising corporate taxes.
At the end of December, the government proposed that large businesses pay a one-time payment of RUB200-250bn ($2.8bn-$3.5bn) to the federal treasury. The state-owned gas behemoth has already been forced to pay a special tax in October of RUB416bn to prevent the federal budget going into deficit for the first time in 2022 in that month – a windfall tax on the extraordinary revenues it earned in 2022 after gas prices increased 20-fold due to the mounting energy crisis.
Budget revenues saw November spikes that lifted revenues significantly relative to November 2021. Gazprom paid one part of its large October- December extra tax on gas production and the government’s dividend income for the first half of the year from state-owned firms, especially Gazprom, rose very sharply. While total nominal revenues in September-November otherwise fell by 6%, Gazprom’s production tax payment boosted them to an increase of 6%.
Nevertheless, a crash in oil revenues after the EU imposed an oil embargo on December 5 meant the budget still ended the year with a 2.3% deficit and also started January with a deep deficit for the first month of the year of RUB1.76 trillion ($24.8bn) – half of the RUB3 trillion deficit expected for all of 2023. Now that deficit could be two or three times higher this year, say economists. The Russian Ministry of Finance (MinFin) needs to find more money to fund the gap.
The government is becoming alarmed at its falling revenue and at the end of last year Prime Minister Mikhail Mishustin proposed to carry out "income mobilization". Among the discussed measures was an increase in dividends for state-owned companies and lump sum payments from large companies. The Bell reports that in mid-December the government proposed the Russian Union of Industrialists and Entrepreneurs (RSPP), Russia’s big business lobby group, allocate about RUB200bn to the federal treasury – and that was a compromise as the discussion started with RUB400bn, according to The Bell.
The government is looking to expand the Gazprom special tax to all of Russia’s biggest cash cows. In December the government invited businesses to come up with their own proposals for raising revenue. In response, the RSPP has proposed to increase the 20% corporate tax on Russian companies by 0.5 percentage points in 2023.
The RSPP has been resisting MinFin’s pressure to pay more taxes and has been in a dispute with the government over corporate tax and exchange rate differences since March. The union had proposed not to take into account paper profits received from the revaluation of foreign exchange assets for tax purposes. However, when the ruble unexpectedly strengthened, the budgets of regions where large exporters are registered suffered. By the end of the year, corporate tax revenues to regional budgets – one of their biggest sources of funding – had collapsed by 40.2%.
18 RUSSIA Country Report March 2023 www.intellinews.com