Metallurgists were caught up with new taxes // The Ministry of Finance is going to impose their profits from previous years

The Russian Steel Association, which lobbies for the interests of ferrous metallurgists, criticized the Finance Ministry’s bill to raise income tax for companies that have spent more money on dividends over the past five years than on investments. In her opinion, this will lead to an outflow of investments and destabilization of the stock market. At the moment, the government and business continue to discuss tax changes.

The lobby of ferrous metallurgists “Russian Steel” sees significant risks for the Russian economy in the draft law of the Ministry of Finance on a retrospective increase in income tax for companies that have spent more on dividends than invested in the past five years. As follows from the statement of “Russian Steel”, the tax rate for such companies may rise from 20 to 25-30%.

Let us remind you that now the government is considering different ways of getting additional tax revenues from metallurgists.

Initially, the idea was to remove the “excess profits” from the rise in metal prices in 2021, but in recent days it has been significantly modified – now the growth of both MET (which is planned to be tied to the exchange quotations of the corresponding raw materials) and income tax are being considered.

First, Russian Steel does not agree that the company’s indicators (dividends, investments, depreciation) over the past five years are used to determine the applicable rate. In her opinion, this violates the fundamental principle that the law is not retroactive. There is also a risk that the business will not be able to implement previously assumed investment obligations, which were initially based on calculations that provide for completely different financial indicators.

Another claim of Russian Steel is that the proposed solution does not determine the procedure for its application to holding companies.

It is not clear how the payment of dividends and investments made by individual legal entities of the company will be recorded, which may limit the flow of investments within the group and reduce their efficiency, ”the statement said.

Finally, metallurgists believe that this rule violates the fundamental principle of the market economy – the freedom of the owner to dispose of his funds after taxes. This approach, according to Russian Steel, can lead to a deterioration of the investment climate in the economy and the impossibility of long-term planning for investors. As a consequence, this will lead to an outflow of investments and destabilization of the stock market. The measure will also limit the free flow of finance between various sectors of the Russian economy. The association calls on the government to develop measures to stimulate investment, not coerce it. “As the world practice has shown more than once, coercion to this is counterproductive,” the statement said.

Evgeny Zainullin

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