Page 54 - RusRPTDec18

legal precedent that matters.
● The Indian pharmaceutical company Jodas will have to pay 200mn rubles ($3mn) in back taxes and fines.
● Thanks to the cooperation of the Indian tax service, the Federal Tax Service will be able to apply fines directly to Jodas instead of its proxy companies.
● It is typically very difficult to get tax data for foreign companies, but this case could establish a new precedent for cooperation.
6.1.2 Budget dynamics - govt funding plans
For the first time since September 2013, Russia will sell a euro- denominated bond, the Ministry of Finance said on November 26. The debt will mature in December 2025, with a 3% benchmark yield. The Ministry of Finance does not need to borrow externally right now; Russia’s budget is in surplus. Rather, this issuance is an experiment to test demand in foreign markets. Especially after the military clash with Ukraine in the Kerch Strait, Russia wants to ensure that it can still access international capital markets, despite its interventionist foreign policy. By issuing the Eurobond in euros, the Ministry of Finance continues to reduce its dependence on the dollar as new US sanctions loom. That euro rates are currently lower than the Fed’s is an added bonus, thereby decreasing Russia’s borrowing costs in euros against the dollar. Finance Minister Anton Siluanov spoke in December 2017 about the possibility of issuing euro-denominated bonds this year if he saw demand among investors. The only Russian government euro-denominated bond currently in circulation was issued in September 2013 and matures in September 2020. This €750mn issuance features a 3.625% benchmark yield. In March, the Ministry of Finance issued $4bn of dollar-bonds just days after the Skripal poisioning in Salisbury. Despite the flare-up in geopolitical tensions, investors bid for almost double the offering.
6.1.2 Budget dynamics - regions
The regional finance system is unstable and unbalanced, warned international ratings agency Standard & Poor’s (S&P) experts. On the one hand, the government supports the regions financially, on the other, it changes the tax system every year, and taxes account for almost 70% of their revenues. Over the past 10 years, the government has reduced the income tax rate, introduced new personal income tax deductions, constantly changed the rates and rules for crediting excise tax revenues, introduced and canceled regional taxes, S&P analysts list in the review. Thus, in 2017, the regions lost 1 pp from the income tax, from 2018 they received the right to impose a tax on movable property, but in the same year they lost it. Regional authorities themselves can influence only 10% of their revenues, mostly non-tax - from the sale of property and fees, writes S&P.
54 RUSSIA Country Report December 2018 www.intellinews.com