November 30, 2023 11:44 am

Russian businesses are bracing for another round of tax hikes as the government seeks to address a growing budget deficit, but they want more predictable fiscal policies in return. The conflict in Ukraine has placed significant strain on state finances, with Russia doubling its 2023 defense spending target to over $100 billion, or one-third of all public spending.

The Russian government has already raised taxes, including introducing a one-off windfall tax on big business and increasing mineral extraction taxes on the energy sector. In addition, export duties linked to the rouble-dollar exchange rate were imposed from October 1st.

Alexander Shokhin, head of the Russian Union of Industrialists and Entrepreneurs (RSPP), stated at a financial conference that businesses are ready to discuss increasing income tax if there are intelligible, clear and fairly systematic investment tax deductions. He emphasized that while the tax system needs to change, it must be done in a way that allows both the finance ministry and businesses to understand how the tax situation will change under certain conditions.

Last week, Russian businessmen meeting with President Vladimir Putin proposed that any increase in income tax be accompanied by greater long-term predictability in fiscal policy. A source familiar with the discussions told Reuters that businesses understand that exactions will continue but hope for a gentleman’s agreement where they pay more but there are no unexpected changes in the near future.

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