Russian businesses are ready to accept another round of tax hikes as the government seeks to rein in a ballooning budget deficit, but they want more predictable fiscal policies, the head of the country’s top business lobby said on Tuesday.
The costs of the conflict in Ukraine have placed growing strains on state finances, with Russia doubling its 2023 defense spending target to over $100 billion, or a third of all public spending. 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. It also imposed export duties linked to the rouble-dollar exchange rate from October 1.
Alexander Shokhin, head of the Russian Union of Industrialists and Entrepreneurs (RUIE), told a financial conference that businesses are willing to discuss increasing income tax if there are intelligible, clear and fairly systematic investment tax deductions. He said that while businesses understand that exactions will continue, they need some formulas that will allow both the finance ministry and business to understand how the tax situation will change when certain conditions vary.
Last week Russian businessmen meeting with President Vladimir Putin proposed that any increase in income tax be accompanied by greater long-term predictability in fiscal policy. A source familiar with the discussions told Reuters that this was an attempt to conclude a gentleman’s agreement – businesses pay more but there are no unexpected changes in the near future.