500 billion rubles will be taken from business due to Putin’s May decree

The increased VAT will start working only from January 1, 2019, money from raising the retirement age will appear even later - but Vladimir Putin’s May decree requires money now. Who will pay for it? Of course, business. To do this, it is not even necessary to introduce any new taxes, decided presidential aide Andrei Belousov - he proposes to simply withdraw “excess profits” of more than 500 billion rubles from metallurgical and chemical companies, received due to high prices.

• Belousov proposed to collect an additional 513.7 billion rubles from metallurgists and chemists into the budget in a letter to Vladimir Putin, which RBC reviewed. This is almost the same amount as the upcoming increase in VAT from 18% to 20% (600 billion rubles) will bring to the state. Putin put the resolution “I agree,” writes RBC (his press secretary Dmitry Peskov, however, does not confirm this). The purpose of the seizure is to finance the implementation of Vladimir Putin’s May decree , the letter directly states. Scans of the letter were published by the Nezygar telegram channel, and a federal official confirmed its authenticity to The Bell.
• In his letter, Belousov calls the profit for 2017, “generated due to market conditions and independent of the actions of company management,” as superprofits. This is most likely about an increase in world prices (metals, for example, according to Bloomberg, rose in price by 20.8% in 2017), and not about the devaluation of the ruble, which is beneficial for exporters (it strengthened by 6.5% in 2017).
• In total, the letter lists 14 companies - these are all the largest metallurgical and coal companies, except for the sanctioned Rusal, and the chemical companies Sibur, Phosagro, Uralkali and Acron. It is proposed to withdraw from them from 5.49 billion rubles (Evraz) to 114.2 billion rubles (Norilsk Nickel is 90% of the company’s net profit for 2017). Belousov recalls that in 2016 the government already confiscated excess profits from oil workers, and metallurgists and chemists pay less taxes - on average 7% versus 28% in the oil industry.
• The current tax system does not create conditions for additional withdrawals of excess income, Belousov rightly notes. Therefore, the Ministry of Finance was asked to develop a mechanism for such withdrawal.

What's in it for me?

The idea sounds, to put it mildly, non-market, and the proposal to develop a mechanism for seizing profits from businesses that the government deems unnecessary is scary. Belousov mentions 2016 - but then super-profits were taken from oil workers to cover huge holes in the budget with oil below $30, and not to fulfill election promises about the development of education, healthcare and infrastructure with oil at $70. If the proposal is approved, shareholders of metallurgical (almost all of them are public) and chemical companies should prepare for a reduction in dividends. For all other businesses, this will be a signal that the state is going to manage the economy using non-market methods. And you can forget about Deputy Prime Minister Anton Siluanov’s promise not to change taxes for 6 years - why change taxes if you can “withdraw excess profits” just like that.

Petr Mironenko