‘This money should be returned to us in the form of tax’
The Kremlin wants metal producers to pay for extra profits
Against the backdrop of record-high metal prices, which are likely to increase the cost of planned infrastructure projects, Russia is eyeing imposing additional taxes on metal producers. The government already raised taxes for metal firms last year.
Russian metal producers may face a demand to pay 100 billion rubles ($1,4 billion) in additional tax to the government for “screwing the state”, says Reuters citing the country’s First Deputy Prime Minister Andrey Belousov. In an interview with RBC TV channel, the official stated that certain industry players, which he didn’t name, had recently shown strong financial results. “That is not a bad thing. And it is not even bad that they are paying dividends. The bad thing is that they all raised prices on the domestic market in line with growth in world prices,” he said.
“We have calculated that [...] metal producers have screwed us, the state, the budget, in terms of state investments and the state defence order by about 100 billion rubles. This money, I think, should be returned to us in the form of tax,” said Belousov. President Putin’s Press Secretary Dmitry Peskov confirmed on Monday that the president was aware of the issue. “Prices have been very high, and additional profits have been generated,” Peskov said calling the situation part of economic life. “Business earns money, the state receives taxes, and when an imbalance arises, the state evens out this imbalance,” he added.
The Kremlin is monitoring rising commodity prices in the construction sector, as it aims to keep domestic prices stable even when they rise at a global level. According to bneIntelliNews, at the end of the first quarter of 2021, steel prices were at their highest since August 2008. Meanwhile, the budgets of Russia’s key infrastructure projects were drafted before the rise in prices. Infrastructure construction is expected to be the focus of state investment in the near future.
As for metal producers, they argue that metals prices are cyclical, and price increases can be short-lived. Besides, their capital investments are at their highest in twenty years, while tax payments are expected to increase twofold to 200 billion rubles in the first half of 2021. VTB Capital analysts estimate that if spot steel/raw material prices stay for the next 12 months, an additional income tax from the industry may total up to 355 billion rubles. “This would more than cover the 100-billion-ruble costs overrun by the state, again creating the possibility of a compromise between the state and the industry,” they believe.