Gazeta: "Tax holidays"
Businesses ask for tax deferments to avoid layoffs
On November 26, 2008, Prime Minister Vladimir Putin convened, for the first time during his second term in office, a meeting of the government's Council on Competition and Entrepreneurship.
With the official agenda highlighting the discussion of the programme to develop competition in Russia and the government's plan of action to implement it, the number one issue under discussion was the economic crisis and ways to surmount it.
Prime Minister Putin started the meeting by pointing to a correlation between the crisis and competitiveness, but he made a correction in the scheme. It would seem that the crisis is good because only those companies that are competitive will survive, but the Prime Minister was not convinced of this. He was worried that the anti-crisis measures would help not the most efficient companies survive, but rather those who are closest to a source of state funds. The council members took up the theme and made some anti-crisis proposals that would save the competitive, and not the others.
REAL ANTI-CRISIS PROGRAMME
Boris Titov, head of the business association Delovaya Rossia and co-chairman of the Right Cause party, put a sort of "sensational bomb" on Mr Putin's table.
It all began with a debate about the effectiveness of profit tax rate cuts next year from 24% to 20% (in Kazakhstan, for example, it was cut from the same 24% to 17.5%).
Yesterday, Alexander Shokhin, President of the Russian Union of Industrialists and Entrepreneurs, told the Prime Minister that this anti-crisis measure is, of course, effective, as it will help businesses to save 400 billion roubles a year. The question that remains is who will see a profit next year. Mr Putin calmed him down by saying that there would be profit, even if not in the ante-crisis amounts.
Mr Titov, on behalf of the entire business community, proposed going beyond profit tax cuts. In the event that state funds allocated to banks (a total of 5 trillion roubles) do not reach the industrial sector, the funds must be left for some time with the companies that have earned them.
The matter concerns the granting of a two-year tax credit to interested companies at the Central Bank's current refinancing rate of 12%. Mr Titov proposes that the tax credit should include VAT and profit tax payments that should have been paid in the second half of 2008.
Mr Titov's proposal is risky for the budget: numerous companies that are not quite competitive will go bankrupt and not repay their debts to the treasury. But, first, the government is already taking great risks by helping banks. Second, the enterprises that will receive a tax credit will undertake to keep the wage fund at the September 2008 level, which means that the entrepreneurs promise to not have any layoffs and to not cut wages.
This is not all. The meeting participants proposed a solution to the liquidity problem in the industrial sector by means of government guarantees for commercial loans at a fixed interest rate (the Central Bank's refinancing rate plus three percentage points - no more than 15% annual interest).
Mr Titov thus explained the need for this measure to the Gazeta daily: Banks do not issue loans, even when they receive state support, for three reasons. First, they trust no one. Second, clients flee the banks. Third, it is profitable for the banks, since they can create a liquidity cushion using state funds.
Mr Putin did not turn down the above proposals, but asked his aides to "examine the issue."
HOLDING THERAPY
The crisis is a cure, Mr Putin explained, not just an injection of state funds or tax deferments. It is also important to ensure sound competition for all Russian companies.
The Federal Anti-trust Service is trying to do this, but with little success. Mr Putin said yesterday that violations of anti-monopoly legislation had become systematic.
The matter concerns jet fuel, the housing and utilities sector, oil products and coke. More and more companies abuse their dominant position in the market (Mr Putin cited the FAS's data: in 2007, the FAS detected 1,590 such violations (up 17% year-by-year) and 226 illegal cartel collusions.
Bureaucrats were not losing time either: last year, the FAS discovered 2,970 legal acts violating anti-trust legislation. They all were adopted by state bodies and municipal governments. Those bureaucrats will surely be punished - pay fines or even spend some time in prison: there is a proposal to introduce criminal liability for violators of anti-monopoly legislation. Yesterday, Mr Putin declared war on cartels, but there will be concessions, too. Holdings will be allowed to carry out mergers and takeovers among themselves without a FAS special permit. A usual notification will suffice.
Konstantin Smirnov
