Vedomosti: "Benefits for business"
Dmitry Kazmin, Filipp Sterkin
The Government has launched an "anticyclical policy"
Prime Minister Vladimir Putin demanded that, starting in 2009, profit taxes be cut to 20% for everyone and to 5% for small businesses, and that depreciation premiums be tripled.
Russian business has at last received wide-ranging tax cuts. The measures were announced at yesterday's United Russia convention by the party's leader, Prime Minister Putin, and will come into effect from 2009.
State Duma Speaker Boris Gryzlov promised that the parliament's lower house will today approve amendments to the Tax Code in second and third readings. Yesterday, the Budget Committee held an emergency meeting, adding all of Mr Putin's proposals to the list of amendments approved in first reading, said Alexander Kogan, the committee's deputy chairman.
This is a crisis quick-response plan; proposals to improve the tax system will be ready by April, said Deputy Economic Development Minister Stanislav Voskresensky.
PROFIT TAX
The most significant of Mr Putin's announced steps is to cut profit tax from 24% to 20% at the expense of its federal part. The federal budget will get only 2.5% (now 6.5%) of company profits, while the regions will be allowed to cut the tax by a further four percentage points. Finance Minister Alexei Kudrin estimated budget losses at 400 billion roubles. This is the top limit, Voskresensky believes: missing profits will be less.
The cut in profit tax is the most stimulating measure, said Alexandra Suslina from the Economic Expert Group: the budget will lose 0.8% of GDP (412 billion roubles) in 2009.
The largest contributor of profit tax to the federal budget is the fuel and energy sector, accounting for 24% of budget revenues. As calculated by Valery Mironov from the Development Centre, the manufacturing industry is next with 19%, 9% of which is provided by the metals industry. They are followed by real estate business (12.5%) and trade (11.6%). As estimated by Ms Suslina, the cut will reduce the tax burden on the oil sector from 66% (2007) to 64%; on the gas sector, by one percentage point, or to 33%; and on the non-oil and gas sector, by one percentage point, or to 28.3%.
With loans becoming difficult to obtain, the additional 4% of profit will help the company to steady its finances, said Gennady Krasovsky, a LUKoil spokesman.
However, many will be unable to end the year with a profit, said the chief accountant of a metals plant, so the measure will come handy in the future.
Dmitry Shmelev, commercial director of Snegiri Development, says, "This is the right step, but not enough." Developers are looking for an abolition of VAT on shared construction contracts.
SMALL BUSINESS
To help out small businesses, Mr Putin proposed that regional authorities be allowed to cut simplified profit tax by 10 percentage points, down to 5%. The current rate is 15% (turnover tax is 6%). As calculated by the Finance Ministry, the new tax can be paid by companies whose earnings in 2009 will not be higher than 26.8 million roubles.
Simplified profit tax is a better option for firms with a fairly large turnover and a low margin of profit, such as traders, said Sergei Shapovalov, general director of Nalogovaya Pomoshch (Tax Aid). "We asked for simplified profit tax to be automatically cut for all regions," said Sergei Borisov, president of Opora. Now that everything is under local control, Borisov fears that not all local authorities will agree to give up such revenue (simplified profit tax is paid into the local budget). He also said that it was not clear which industries could profit from a lower tax. In his view, these could be innovatory and manufacturing businesses.
FASTER DEPRECIATION
The depreciation premium will be increased to 30% from the current 10%, Mr Putin said. The measure will help reduce taxable profit by 30% on fixed assets acquired in 2009 (for 3rd-7th depreciation groups). It will encourage companies to invest in new plants even during crisis time, said Mironov. Previously, the measure was scheduled for 2010, but metals producers asked in October for the date to be advanced.
The step will cost the budget 0.16% of the GDP (83 billion roubles, according to the current forecast), the Economic Development Ministry calculated. Mr Kudrin's estimate is almost twice that. This, however, will affect mainly big companies, which have a schedule for the introduction of new equipment, said the chief accountant of the metals plant; average-sized companies are unlikely to renew their assets in 2009.
