Home » Business » State Implements Tax on Excess Profits for Large Businesses: Who Will Pay and Where Will the Money Go?

State Implements Tax on Excess Profits for Large Businesses: Who Will Pay and Where Will the Money Go?

/Pogled.info/ The state wants big business to share a part of its windfall profits that it earned in 2021-2022. The logic is that the higher revenues were obtained to a large extent thanks to favorable market conditions – ultra-high prices. While now the country’s budget is suffering from a drop in revenue. Who will have to share and what will the proceeds of excess profits taxes go to?

The State Duma passed a bill on the tax on excess profits for large companies in the first reading. This tax will be a one-off. It must be paid by January 28, 2024 by companies that received an average profit for 2021 and 2022 of more than 1 billion rubles. The tax rate will be 10% of the profit. Average earnings for 2021-2022 and 2018-2019 will be taken into account.

However, it is possible to save and pay half as much – 5%. To do this, the company must independently transfer money in 2023.

The logic of the state is that last year big business received super-profits many times larger than usual, largely due to favorable market conditions. Including because of high global inflation. Therefore, they must share a one-time piece of this “luck”. But we are only talking about large businesses, this tax will not affect small and medium businesses.

Who will have to pay gross income tax? All companies with revenues over 1 billion rubles. The Ministry of Finance estimated that the budget would receive an increase of 300 billion rubles from this one-time tax. The main contributors to this will be the producers of solid minerals, who will pay 20% of the total tax, the producers of mineral fertilizers (will pay 19%), the metallurgical complex (13%), wholesalers and retailers (12%), banks (9%) and the other 6% remain for other industries. Such data was reported by Deputy Finance Minister Alexei Sazanov, who evaluated the top 50 largest taxpayers in Russia.

However, exceptions were made for companies in the oil, gas and coal mining sectors that already pay mineral extraction tax. In addition, Gazprom already paid a similar one-time tax on excess profits last year. Now the company has fallen on hard times, given the sharp drop in exports to the European market due to the Nord Stream blow-up. The oil industry is also operating under difficult conditions due to the embargo and the complete restructuring of the export trade. Exceptions are also made for producers of vegetables, fruits, cereals, meat, fish and other agricultural products, as they pay the single agricultural tax (6% of taxes).

What will the extra money received by the “rich” go to? The main goal is to replenish the federal budget. The budget deficit for six months has already exceeded the budget for the whole year. According to the plan, the deficit in 2023 should amount to 2.9 trillion rubles, but from January to May 2023 it is already higher – 3.4 trillion rubles.

Russia’s money in 2023 is needed primarily to eliminate the budget deficit, which is growing on the back of falling oil and gas revenues and increased spending. Many items of budget spending are classified, but there is no doubt that the increase in spending is necessary primarily in the military-industrial complex, the president of the Russian Federation also recently indicated this,” says Vladimir Chernov, an analyst.

The state also has its social obligations to citizens, and this year it is necessary to increase spending not only on the military-industrial complex, but also on logistics against the background of redirecting export flows, the expert adds.

“The state plans to increase funding for the social sector, in particular to increase the minimum wage, implement infrastructure projects,” says legal expert Yaroslav Petryk.

However, the new taxes should be established taking into account the balance between the interests of society and business, the lawyer added. “The task of the initiators of the adoption of the law is to develop in detail its economic justifications. With the aim, on the one hand, to “withdraw” funds from the economy in an amount sufficient for the performance of the functions of the state, and on the other hand, not to cause significant damage to the investment opportunities of large companies,” Petrik says.

“They want to introduce an additional tax on excess profits for big business, but retroactively. However, some enterprises may not have the necessary amount of money to pay even 10% retroactively,” warns Galina Semenova, associate professor from the Department of State and Municipal Finances at Plekhanov State University.

“The consequences for the state will be positive, as it will have to borrow less on the domestic debt market.” And for companies – negative, as they will make unplanned expenses. But a one-off tax payment, especially this year’s 5%, should not knock the ground out from under the feet of the biggest companies. It may be more difficult for smaller ones, but that’s why they have set a threshold for revenues of over 1 billion rubles, so that small companies do not fall under the tax,” says Vladimir Chernov.

Another important positive point is that the funds from the payment of this one-time tax will not go to reserve funds, but will be spent in the near future and thus will return to the economy again.

In particular, government contracts will be paid, infrastructure projects will be financed, social payments will be made, which will increase the demand for goods and services, etc., notes Petrik.

As for the budget deficit of more than 3 trillion rubles, then, of course, the 300 billion rubles that can be obtained will not completely close the hole. However, this is one way to fill the budget. The authorities will, of course, use other opportunities to increase revenue.

First, in the second half of 2023, an increase in budget revenues is expected due to an increase in world oil prices and a reduction in the discount for Russian oil. Second, it is planned to eliminate the budget deficit by borrowing on the domestic market. “Recently, all Federal Loan Bonds have been bought and demand for them exceeds supply amid expectations of a rise in their yields following the increase in the main refinancing rate of the Russian Central Bank in July and the reduction of risk appetite,” Chernov said. The third factor is the sharp rise in the ruble exchange rate to 87 per dollar, which can significantly increase the Russian Federation’s budget revenues from exports, if it remains in its current positions, the source concludes.

Translation: V. Sergeev

Subscribe to our new Youtube channel:

Subscribe to our YouTube channel:

and for our Telegram channel:

Log in directly to the site

Share on your profiles, with friends, in groups and on pages. In this way, we will overcome the limitations, and people will be able to reach the alternative point of view on the events!?

Become a friend of Look.info on facebook and recommend to your friends

2023-07-02 13:39:26
#rich #Russia #share #excess #profits

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.