The Russian government is seeking to rein in a ballooning budget deficit, and businesses are ready to discuss the issue of increasing income tax as long as there are intelligible and predictable investment tax deductions, Alexander Shokhin, head of the Russian Union of Industrialists and Entrepreneurs, said on Tuesday.
The conflict in Ukraine has put 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 hiking mineral extraction taxes on the energy sector. Export duties linked to the ruble-dollar exchange rate have also been imposed from October 1st.
Last week, Russian businessmen met with President Vladimir Putin proposed that any increase in income tax be accompanied by greater long-term predictability in fiscal policy. This was reported by Vedomosti newspaper citing unnamed sources. Business understands that exactions will continue but they are looking for a gentleman’s agreement where they pay more but there are no unexpected changes in the near future. A source familiar with the discussions told Reuters.
The head of the country’s top business lobby stated that businesses accept that another round of tax hikes is inevitable but they want more predictable fiscal policies. He emphasized that while they understand that the tax system cannot remain unchanged, they need formulas that will allow both the finance ministry and business to understand how the tax situation will change when certain conditions vary.