Report: Putin’s aide suggests additional tax on several industries

MOSCOW, Aug 10 (PRIME) – Presidential aide Andrei Belousov has suggested additional taxes on some metals, petrochemical, and fertilizer producing companies totaling up to 500 billion rubles a year, Bloomberg reported late on Thursday quoting Belousov’s letter to the president.

“Additional budget revenues are needed to help pay for Putin’s promises to boost spending after his re-election this spring… The tax proposal could raise as much as 500 billion rubles ($7.5 billion) a year, according to the letter, which calculated rates based on profits from 2017. It would also affect chemical and fertilizer producers,” Bloomberg reported quoting the letter.

Bloomberg mentioned metals giant Norilsk Nickel, diamond mining giant ALROSA, and petrochemical holding Sibur among the companies that could pay the highest tax.

Vladimir Lisin, the core beneficiary of steelmaker Novolipetsk Steel and the president of association of national steel producers Russian Steel, said that the exemption of additional incomes of companies exceeds their annual investment and doesn’t take into account their debt.

“The proposals raise many questions. For instance, it has to take into account the debt burden in a different way if they want their calculations to be fair. They should not have included revenues from foreign jurisdictions into the tax base, as foreign regions have different taxations. The debt burden should not be calculated on revenue, but on profit, which is the source of investment, dividends, and payments to the state,” he said.

The additional tax looks like an encouragement of inefficiency, as a company would have to pay less tax if its profitability is lower. The suggestion also does not take into account previous investment of the company that it used to raise profitability, and investments that the company would make in the future.

“As a result, we are running risk that investment and competitiveness will fall. The planned withdrawals from ferrous metals companies stands at 250 billion rubles, while combined investment of the sector in 2017 reached 170 billion rubles,” he said.

(66.2856 rubles – U.S. $1)

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