Lower windfall tax for some being discussed, but at expense of others to still raise 300 bln rubles - Shokhin
MOSCOW. April 25 (Interfax) - Businesses and the Russian Finance Ministry are continuing to "polish" amendments to the Tax Code concerning the introduction of a one-time levy on windfall profits earned in 2021-2022, although the main terms of the windfall tax, including that the final amount of the payments will total 300 billion rubles, have been agreed, the head of the Russian Union of Industrialists and Entrepreneurs (RSPP), Alexander Shokhin told reporters on Monday.
One of the issues yet to be agreed is whether companies in certain sectors can expect the size of their payments to be reduced. Shokhin indicated that the ministry does not rule out a reduction on the condition that the overall amount raised by the tax remains unchanged, which means payments for companies from other sectors would automatically increase.
"We will still probably continue to clarify some issues. That is, the basic concepts, figures are clear, but polishing is still being done on specific wording. And, possibly, on some deductions [from the tax for certain companies], but on the understanding that we don't want to go outside of 300 [billion rubles] and, secondly, some criteria of social justice, that any preferences in this case will fall on the rest," Shokhin said.
The proposal to introduce a reduced rate for the windfall tax was earlier floated by, among others, fertilizer producers in the person of PhosAgro . The company sent a letter to the Kremlin administration asking that the tax be reduced for it by the amount of export duties paid in 2023. PhosAgro argued that the windfall tax duplicates the export duties imposed as of January 1, 2023 as an instrument to collect windfall profits from the growth of world fertilizer prices in 2021-2022.
Payment by "traffic fine formula"
Shokhin said that the RSPP has not yet prepared an opinion on the Finance Ministry's bill concerning the windfall tax because the document had not been presented officially yet. However, discussions are proceeding in due course and last Friday, for example, members of the business association held a video conference on this matter with Deputy Finance Minister Alexei Sazanov.
The ministry sent out the draft amendments to the Tax Code regulating the payment of the windfall tax last week. The current version of the document calls for a basic tax rate of 10% of the amount by which profits for 2021-2022 exceeded profits for 2018-2019. The law will go into effect as of January 1, 2024, but there would be a deduction in the amount of funds paid into the federal budget voluntarily from October 1 to November 30, 2023 multiplied by two. Therefore, businesses would be able to pay the tax in 2023 at a rate of 5%.
This approach - a discount for early payment - has been agreed with businesses, particularly since the RSPP itself proposed such an option back in February, Shokhin said on Monday.
"The formula itself, 5-10%, this was again my proposal. I, though, had in mind sometime back in February, so that it would be possible to introduce a tax-type mandatory payment into the Tax Code, let's introduce it as of January 1, 2024, and then come up with a 'traffic fine formula,' as I said - whoever pays early gets a 50% discount. This formula was accepted, although the proposal came from businesses to an equal degree," Shokhin said.
However, the discount that businesses had in mind in February was different from the one proposed by the ministry, he added. "I personally meant something else - [a total levy of] 300 [billion rubles], but if [paid] early then 150 [billion rubles]," Shokhin said.
Commenting on whether many companies will be able to take advantage of the discount, he said this will depend on the market situation and that problems might arise with paying the tax given the large amount of additional payments to the budget introduced earlier.
"Everything will still depend on capabilities. We understand, after all, that the situation, both external and internal, is changing. The main thing for us, always, as we've said, is the predictability of the fiscal system. Of course, problems will arise with this windfall [tax], particularly since the government introduced windfall [levies] by other means - the mineral extraction tax and export duties by sector, and even the notorious excise on liquid steel. What is this if not a windfall [tax] in various formats. Therefore, we can't say that this is something new," Shokhin said.
Polishing the details
While the total levy and the size of the discount - up to 300 billion rubles and 5% with a base rate of 10%, respectively - have been agreed, businesses and the Finance Ministry are continuing to polish the details of the bill.
One of the contentious issues is the application of the windfall tax to consolidated groups of taxpayers, Shokhin said. Under the version of the bill seen by Interfax, companies that in 2022 were the responsible members of a consolidated group of taxpayers in 2022, meaning they calculated and paid profit tax, will also pay the windfall tax for the members of the group.
A number of other proposals concern the possibility of taking into account investments and other payments.
"Of course, many companies would like to, let's say, take into account the amount of investments they've made. This was also initially our proposal, to take into account investments in social infrastructure in regions with a presence and simply in modernization, to separate the situational effect, as they say, from the effect related to modernization of production and so on. All these things, of course, are individual and difficult to administrate. Here the principle of, let's say, whoever is more convincing might receive will be at play. But, in any case, since the figure of 300 is, as they say, fixed at the Finance Ministry, any discount for someone is, as they say, an increase for the rest," Shokhin said.
Businesses are also concerned about the concept of an "extraordinary" tax in the current version of the bill.
"One would like the windfall [tax] to be an extraordinary tax, and not some new inventions. As far as we understand the Finance Ministry's position, the ministry this year gave us its 'scout's honor' that it will not propose new taxes," Shokhin said.