Russia should consider extra taxes to tackle corporate 'greed', says PM
Thursday, 13 May 2021
MOSCOW, May 12 (Reuters) - Russia should impose extra taxes or other penalties on Russian companies that show “greed” by shifting profits abroad but such revenue-raising measures should be balanced to avoid discouraging business, the prime minister said on Wednesday.
Mikhail Mishustin’s proposal echoed one from President Vladimir Putin, who said last year that a tax should be levied on interest and dividend payments leaving Russia, which led to amended taxation treaties with Cyprus and Malta.
Net capital outflow from Russia more than doubled in 2020 to $48.4 billion, hit by COVID-19 and a pandemic-induced fall in oil prices, while Russia’s current account surplus shrank to $33.9 billion, a drop of almost 50%.
Lawmakers on Tuesday voted to scrap a tax agreement with the Netherlands, where several large Russian companies are registered, a move that could mean that certain firms are taxed in both jurisdictions, known as ‘double taxation’.
“If a company is aggressively withdrawing dividends, interest, and royalties from the Russian Federation, then appropriate progressive tax rates on profit, or some other approaches, should be applied,” Mishustin said.
Speaking as he presented a government report to the lower house of parliament, he said the government was ready to take such steps to keep more revenues in Russia’s regions and ensure companies helped create infrastructure for social development.
“Greed should be paid for with additional taxes and earnings to benefit the country’s budget, where these firms operate,” Mishustin said. “We need to strike a balance and not kill the desire in business to create new products and to export.”
Foreign dividend outflows account for around $30 billion-$50 billion a year although some of this is repatriated, said Dmitry Dolgin, chief economist with ING Russia.
“The fight against capital flight has been going on for a long time,” said Dolgin, saying the central bank had revoked licenses for banks in the past and the government was now trying to use taxes to discourage outflows.
“One final task remains: increasing the investment attractiveness of the Russian economy for at least domestic capital,” he added.