Surplus profits of companies will go to social needs
Large Russian companies that earned super profits in previous years will have to pay an additional tax to the state treasury. The government approved and submitted to the State Duma a bill on the «Tax on excess profits of past years.» It establishes a one-time payment for large companies whose average profit for 2021 and 2022 turned out to be above 1 billion rubles. In total, it is planned to collect 300 billion rubles from a successful business retroactively and send them to finance the social needs of the budget.
The idea to pay increased taxes for 2021-2020 belongs to the businessmen themselves, and not to the state. According to First Deputy Prime Minister Andrey Belousov, entrepreneurs who have accumulated «colossal windfall profits for 2021 and 2022» decided to make additional contributions without any pressure from the state, so that in the future they would not face claims from regulatory agencies.
According to the government's plan, the collection to the budget will be one-time and will not affect enterprises whose net profit for the previous two years did not exceed 1 billion rubles. Those who pay windfall tax, as the West calls the tax on supernumerary income (“brought by the wind”), no later than January 28, 2024, they will have to pay 10% of the superprofit. If the fee is paid before November 30, 2023, the business will receive a «discount», allowing the rate to be reduced to 5%.
The raw materials industry will not be affected by the new state withdrawals: the government coordinates relations with oilmen through other specific legislative mechanisms — the mineral extraction tax and a damper for motor fuel. Also, companies established after 2020, small and medium-sized businesses, and organizations paying the unified agricultural tax will receive exemption from the new payment. The proceeds from the tax will be used to support and develop the social sphere, and specifically, as Finance Minister Anton Siluanov said earlier, to support families with children. Revenues from windfall tax are estimated by the government at 300 billion rubles. The law, if adopted, is likely to enter into force on January 1, 2024.
“Last year was a time of choice for domestic entrepreneurs: many were deciding whether to keep their place in Russia or move to countries free from Western sanctions,” said Artem Tuzov, director of the corporate finance department at IVA Partners Investment Company. In 2021-22, according to the Ministry of Finance, Russian business made a profit of about 60 trillion rubles. “Obviously, the choice has been made. Entrepreneurs who remained on the national market are the first to be interested in the financial stability of the state,” the expert believes.
At the same time, according to Natalia Milchakova, Leading Analyst at Freedom Finance Global, such a movement of business towards the state was forced due to the difficult geopolitical situation and difficult economic consequences for the Russian economy. “Such a condition has become a preventive measure on the part of entrepreneurs who do not want to avoid the constant increase in fiscal rates in the future. Such a payment is one-time, although it will be paid based on the results of two completed financial years, ”explains the expert. True, the fact that many large corporations are paying out excess profits this year does not mean that taxes will not be raised on them in the future. If the state needs additional funds, officials will most likely come up with and introduce special separate requirements, the MK interlocutor adds.
Sergey Ramaninov, an analyst at Rynki.Dengi.Vlast, agrees with this opinion. “Increasing the tax burden may become a trend. Given the budget deficit (which grew to almost 3.5 trillion rubles in four months), the additional financial burden is quite natural.”
Nevertheless, a new expense item for commercial companies that have long since distributed their previous profits pay raises, dividends to shareholders and new production projects will have to be covered by adjusting the amount of income that is at risk of falling this year. “Operating payments, as part of the profits accumulated by the business, must be reimbursed. Large businessmen, of course, will pay out the excess profits for the past years, — says Sergey Suverov, an investment strategist at Arikapital. — But the social support that the officials are going to provide by «gutting» last year's windfall profits of entrepreneurs will only provide relative assistance to ordinary people. The treasury, of course, will receive 300 million rubles, but inflationary trends threaten to take much larger sums out of the pockets of ordinary taxpayers.