In Moscow, Russian businesses are bracing for another round of tax hikes as the government seeks to address its ballooning budget deficit. However, they want more predictable fiscal policies, said Alexander Shokhin, head of the country’s top business lobby.
The conflict in Ukraine has placed a strain 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.
Russian businesses are willing to discuss increasing income tax with the government but want intelligible, clear and fairly systematic investment tax deductions. They understand that the tax system cannot remain unchanged but need 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 “business understands that the exactions will continue.” They are seeking a gentleman’s agreement where they pay more but there are no unexpected changes in the near future.