The Russian government is seeking to address its ballooning budget deficit by implementing another round of tax hikes, but businesses want more predictable fiscal policies in return. Alexander Shokhin, head of the Russian Union of Industrialists and Entrepreneurs, stated this at a financial conference on Tuesday.
The conflict in Ukraine has put significant pressure on Russia’s state finances, with the government having to double its 2023 defense spending target to over $100 billion. This represents a third of all public spending. In addition, the government has already raised taxes, including introducing a one-off windfall tax on big business and increasing mineral extraction taxes on the energy sector. Export duties linked to the rouble-dollar exchange rate were also imposed from October 1st.
Shokhin emphasized that while businesses understand that they will have to pay more taxes, they need formulas that will allow them to anticipate how their tax situation will change under different conditions. He proposed that there be intelligible, clear and fairly systematic investment tax deductions so that both the finance ministry and business can understand how taxes will evolve when certain variables fluctuate.
Last week, Russian businessmen met with President Vladimir Putin and recommended that any increase in income tax be accompanied by greater long-term predictability in fiscal policy. Vedomosti newspaper reported this information, citing unnamed sources. A source familiar with the discussions told Reuters that businesses are willing to make additional payments but are looking for a gentleman’s agreement – they pay more now but expect no unexpected changes in the near future.