As the Russian government seeks to address its growing budget deficit, the head of the country’s top business lobby has called for more predictable fiscal policies. Alexander Shokhin, head of the Russian Union of Industrialists and Entrepreneurs (RSPP), said on Tuesday that businesses are ready to discuss increasing income tax as long as there are intelligible deductions for investment.
Shokhin acknowledged that taxes must be raised in order to finance the deficit, but he expressed concern about the unpredictability of current fiscal policies. He noted that Russian businesses have been hit hard by recent tax hikes and other measures aimed at generating revenue, including a one-off windfall tax on big business and higher taxes on mineral extraction in the energy sector.
“We need some formulas that will allow both the finance ministry and business to understand how the tax situation will change when certain conditions vary,” Shokhin said. “We understand that exactions will continue, but we need a gentleman’s agreement – we pay more, but there are no unexpected changes in the near future.”
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. Vedomosti newspaper reported, citing unnamed sources, that Putin had agreed to consider this proposal.
The costs of Russia’s conflict with Ukraine have placed a significant strain on state finances. According to a government document seen by Reuters in August, Russia has doubled its 2023 defense spending target to over $100 billion, or a third of all public spending. The Russian government has already raised taxes and introduced export duties linked to the rouble-dollar exchange rate from October 1st.