“When it is difficult, everyone should be involved”
The Kremlin wants to raise taxes “on a number of profitable sectors”
The depleted Russian budget may be replenished at the expense of oil and mining companies as well as tobacco users, considers the country’s Ministry of Finance. The proposals have immediately affected the stock market: on Wednesday, shares of many industry players fell sharply.
Russia is considering raising taxes affecting some mining companies, tobacco sales and the oil industry in order to plug holes in the country’s budget, reports Reuters adding that the move is expected to bring in around 340 billion rubles ($4,54 billion) per year. “When it is difficult, everyone should be involved in solving the problems that the country and its people are facing,” stated Prime Minister Mikhail Mishustin at tjhe government meeting on Wednesday. According to the official, the proposal, which has yet to be finalised, envisages “slightly increasing taxes on a number of profitable sectors”.
The Kremlin may triple the mineral extraction tax (MET) on metals and fertiliser producers next year, say industry sources, while miners of gold, diamonds and coal are not included in the current proposal for mining. The government is also going to scrap a zero MET on high-viscosity oil from 2021. The tax rise would hit such Russia’s top players as Norilsk Nickel, Rusal, PhosAgro, NLMK, Severstal, Evraz and Tatneft. The Ministry of Industry and Trade considers that a higher tax will hit Russia’s emerging and state nurtured production of rare earth minerals. On Wednesday, shares of many industry players fell due to the tax change proposals.
Besides, Moscow wants to increase the excise tax on cigarettes by 20% from 2021. On 16 September, plans were confirmed by Minister of Finance Anton Siluanov. “These are additional resources for the budget, which first of all will be used to finance anti-crisis plans and the fight with [economic consequences of] coronavirus that require significant funds,” said the minister. Tax hikes are expected to add 340 billion rubles to the national budget annually, which totals around 12% of the projected budget deficit in 2021.
“The finance ministry, facing the budget deficit, is looking for sources to increase the budget revenues. This is a perfectly normal process,” commented Kremlin Spokesman Dmitry Peskov. He added that the final decision was yet to be made.
Russia is also planning to increase state borrowing by 875 billion rubles ($11,7 billion) in 2021, announced Siluanov. Thus, the country’s debt-to-GDP ratio would reach 20% next year and should stay at around that level, as the country would increase budget spending in the next three years, he said at the government meeting on Wednesday.