Excess profits tax for war chest
Duma wants to tap money from companies
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Western sanctions due to the war of aggression in Ukraine and other factors are reducing the Russian state's revenue. Parliament is taking countermeasures and asking high-earning companies to pay up. This is intended to generate billions in special revenue.
Around 17 months after the start of the war of aggression against Ukraine, the Russian parliament passed a one-off special tax on corporate profits from previous years. “An excess profit tax will be introduced for organizations with an average profit level of more than one billion rubles (around ten million euros) in 2021 and 2022,” the Russian State Duma announced on its homepage.
Overall, the Russian leadership expects the measure to generate special revenue amounting to the equivalent of around three billion euros. According to the draft law, companies should pay ten percent of the profit from 2021/22 by January 28, 2024, which was above the average profit for 2018/19. This means that the slump in the economy in the Covid year 2020 is not included in the tax calculation. Companies that pay by the end of November 2023 will also receive a discount and only have to pay half.
Oil, gas and coal companies are not affected by the tax because they are already being asked to pay a higher mineral tax. The special levy is intended to plug holes in the Russian state budget. In the first half of the year, the budget deficit amounted to 2.6 trillion rubles (around 26 billion euros). A deficit of 2.9 trillion rubles (around 29 billion euros) is expected for the year as a whole.
According to the Ministry of Finance, the situation has eased somewhat in the past few months after the relationship between income and expenditure became unbalanced, especially at the beginning of the year, due to Western sanctions such as the oil price cap. Among other things, expenses were drastically reduced in June.
