Russia set to raise corporate profit tax but abolish exchange-rate export duties

By Thomson Reuters May 23, 2024 | 5:14 AM

By Darya Korsunskaya

(Reuters) – Russian authorities are ready to discuss abolishing export duties based on the exchange rate in return for a “fair” increase in corporate profit tax rates, Finance Minister Anton Siluanov said on Thursday.

President Vladimir Putin proposed higher taxes for companies and wealthy individuals shortly before securing another six-year term in power in March, in an election widely condemned in the West as undemocratic. Russia is ploughing funds into the defence sector to fund its war in Ukraine.

His intervention appeared to ignite discussions within government about what taxes to change. The finance ministry has promised predictability for businesses following abrupt policy changes in recent years, and has been in discussion with Russian business.

“In the course of determining tax innovations, business proposed abandoning the use of turnover taxes, such as ‘exchange rate’ export duties, which do not take into account its financial result,” Siluanov told lawmakers in the State Duma.

“We are ready to discuss this proposal in conjunction with a fair increase in the rate of profit tax on organisations, that is, taxing the final result, not companies’ turnover.”

Russia imposed export duties linked to the rouble-dollar exchange rate from Oct. 1, 2023, until the end of 2024, on a wide range of goods, while a one-off profit tax in 2023 yielded 318.8 billion roubles ($3.53 billion) for the treasury.

Siluanov said Russia’s corporate tax rate of 20% was the one of the lowest among developed and emerging economies, and promised to channel additional tax revenues into supporting business through investments and infrastructure.

He hinted at raising the corporate tax rate to 25%, as in China and Iran. Such a 5% tax increase would bring an additional 1.9 trillion roubles to the treasury, estimated Andrei Klepach, chief economist at state development bank VEB.

Siluanov said his ministry supported a proposal by businesses and lawmakers to not raise the VAT rate, as this could lead to an acceleration in inflation.

($1 = 90.2775 roubles)

(Reporting by Darya Korsunskaya; Writing by Alexander Marrow; Editing by Ros Russell)