Irek Zinnurov: “Large businesses have got rid of sports “non-core assets”, we must change this tendency”

Why companies don’t want to spend money on sport

The gist of the initiative of deputies Irek Zinnurov, Marat Bariyev and Dmitry Svischev is to make amendments to several articles of the Tax Code of the Russian Federation (first of all, Article 255 and Article 264) that would allow enterprises to include costs on development of physical culture and sport among their employees in costs reducing income tax. Realnoe Vremya got the project of amendments at its disposal.

Today some companies have to carry these additional costs themselves, while many refuse to deal with it in general to save money. The paradox is that the state expresses a desire to increase the number of people doing sport, which is almost impossible without money and a possibility to do sport “without leaving the machine tool” at a regional level.

Tatarstan is a bit more progressive here than other regions — the sports infrastructure in the republic is more developed than anywhere else in the country. But the situation in other regions is sad.

According to Russian President Vladimir Putin’s May decrees in 2018, the regions and executive power of the Russian Federation were given a task — to augment the number of Russians practising physical culture and doing sport to 55% and raise the share of citizens leading a healthy lifestyle. And according to another May decree, workforce productivity in Russian enterprise is to accelerate by 5% a year by 2024, which could be obviously done by both improving the workers’ health and with the help of sports infrastructure in factories. However, it is quite costly to build. And extremely unprofitable.

To return sports clubs to enterprises

Characteristically, a number of companies, especially those who signed sectoral agreements with trade unions, have been obliged to create conditions to do sport at work right now, at least since 2012 when the Ministry of Health Care and Social Development of Russia issued an order with a list of annual measures taken by an employer to improve conditions and occupational health and safety and reduce professional risk levels.

According to this document, enterprises are obliged, for instance, to compensate workers for doing sport in clubs and taking sports classes, organise physical and sports events at their expense, of course, purchase equipment, build rooms for such classes, and it was even offered to create sports clubs. The authors of the new initiative remind that the latter demonstrated themselves very well in the Soviet era when sports classes existed in every factory and enterprise, while amateur competitions between staffs were widely spread.

Though today the possibility of creating such clubs is explained, for instance, in the law On Physical Culture and Sport in the Russian Federation, in reality, they are absent, one of the authors of the initiative, deputy of the Russian State Duma Irek Zinnurov notes sadly.

Why Russian Ministry of Finance is against tax concessions

And they are absent because it is unprofitable for both large factories and small businesses to deal with it, as today the costs to provide such conditions aren’t included in the list of expenses reducing income tax. Surprisingly, a company that wanted to create a football club has to not only spend much money but also pay taxes on it.

It turns out that the state wants to develop sport and would like businesses to help it with this but refuses to make concessions for this help in taxation. It is noted in the initiative that the Ministry of Finance is the major “culprit” of the current situation. It goes without saying that one can understand the ministry’s position: it is famous for its conservative approach both under Kudrin and Siluanov — to collect as many taxes as possible, give as little money as possible to projects.

And today the Ministry of Finance supposes that the costs on compensation for workers’ payment of sports classes (for instance, classes in gyms, purchase of sports equipment for workers, payment of costs on participation in competitions and so on) can’t be included in the list of costs for taxation. Why? Because such events linked with physical culture and sport, the ministry thinks, “take place out of business hours and aren’t connected with an organisation’s production activity”.

But Zinnurov disagrees, at the same time there is another possibility to reduce profit for employers’ expenses to pay tourism services whose consumers are the employee and his family members (Clause 24.2 Article 255 Tax Code of Russia). Meanwhile, the worker who is on holiday doesn’t participate in the production, while his family members have nothing to do with production.

The ban on the reduction of the taxable profit costs linked with the development of physical culture and sports in staff is unjustified, the deputy thinks. And it deprives employers of any stimulus to carry such costs, though they have a positive impact on workforce productivity, improvement of financial results of the organisation and the same taxable base in the end.

The authors of the initiative are even ready to come to a compromise having tied tax concession to the presence of corresponding conditions in sectoral agreements, collective and labour agreements. It is offered to set a limit of such costs during a transition period.

PPP is to help augment number of people doing sport to 55% is to help

Zinnurov is familiar with problems of the existing sports infrastructure in regions first-hand — the water polo player and two-time World and European Championship medallist, Honourable Master of Sport of Russia was the director of Orgsintez swimming pool and chaired Sintez club from Kazan.

The deputy is sure: to execute Putin’s “sports” May decrees, the state needs businesses’ help, while it is possible to ask businesses to do the tasks they don’t specialise in precisely by stimulating them with tax concessions.

Public-private partnership in sport was one of its pre-election promises at the election to the Russian State Duma. He began to work on the initiatives after there was given a task at the latest meeting of the Presidential Council for the Development of Physical Culture and Sport — to augment the number of people doing sport to 55%.

At the next session of the council, which will take place during Russia — Sports Power international sports forum in Nizhny Novgorod, Zinnurov will try to communicate his initiatives aimed to perform this uneasy task to President Vladimir Putin.

“I will remind that large businesses have got rid of sports “non-core assets” in the last years (pioneer camps, kindergartens, health centres, swimming pools, skiing centres), we must change this tendency. And for this purpose the state should provide some concessions, stimulate businesses so that they won’t refuse the non-core assets,” Irek Zinnurov explained to Realnoe Vremya. “And so that they won’t just refuse but will create others, skiing centres for their workers, for instance. All this needs money, businesses have to find the money for such investments. And PPP should make it attractive from a taxation perspective. Then businesses would turn their face to the “non-core assets”, so to speak.”

“We used to have so many skiing centres: almost every factory used to have them”

The proposal on tax stimulation of businesses to build sports infrastructure and improve workers’ health is already considered in some related ministries, the Olympic Committee, the related committee of the Russian State Duma is also familiar with it (for instance, its member, deputy from Tatarstan Marat Bariyev is aware of it too). Labour Reserves sports society, which has recently been created with the assistance of Sergey Chemezov’s Rostec) is interested in it as well. Zinnurov will be talking with representatives of the company about this issue in the next days. Moreover, all related ministers support the initiative in general. Except one.

“Only the Ministry of Finance is against. What is the problem? Whose is the task of developing physical culture and sport? The state’s, right? But it doesn’t have the money to achieve the goal of 55% of people regularly doing sport. Then they should look for allies, and businesses could become these allies. Moreover, we had a good practice in the Soviet era,” Zinnurov explains. “For instance, take Tatarstan, Kazan. We used to have so many skiing centres: the helicopter manufacturing factory, the aviation factory used to have them, almost everyone. Who has them now? Nobody. Everybody simply got rid of them. Some large enterprise deal with it today, but the scale is small.”

“Instead, regions will get sports infrastructure”

However, the initiative might have new opponents — regions. It should be reminded that today 17% out of 20% of income tax is sent to Russian regions’ budgets. Zinnurov&Co’s proposals will bring to a fall in transfers. Employers may not like it on the spot. Irek Zinnurov offers to persuade them with the following evidence:

“For instance, take the same Tatarstan. We are investing huge money in sport now — both in the sports industry and infrastructure. And here businesses will be investing. Yes, the taxable base in Russian regions will reduce. But instead, regions will get sports infrastructure where people, workers will do sport. Besides, if we create sports clubs or skiing centres, we also attract people who will get a salary. So the initiative will help create new jobs as well, and these new people will pay taxes again,” the Russian State Duma’s deputy thinks.

In his opinion, the proposal on tax stimulation will be interesting not only for big enterprises but also for small and medium-sized businesses. And it is a huge number of people who are keen on sport, able to create well thought out infrastructure because it will be built at their expense.

Zinnurov disagrees that the concessions interest only large factories, especially those who finance big football or hockey clubs, sports palaces and so on. And he pays attention to the fact that small businesses already voluntarily participate in such competitions as Timerman, flags of different companies can be seen there. If SMEs are given an extra opportunity, they will engage their employees in sport.

But since the initiative can “force” large businesses make big investments because the financial burden will fall on the enterprise itself at first. Irek Zinnurov, however, assumes that with the coming of new young people to small and large enterprises, the mentality of executives gradually changes, they would like healthy people to work with them because if workers are healthy, it means there will be fewer medical leaves and workers will bring more benefit to the enterprise. Businesses are ready to invest in it, the author of the initiative is convinced, they don’t need any additional money from the state. Rostec’s Labour Reserves organisation should also help with the construction of sports clubs in enterprises.