Translated material
The Ministry of Economy suggested that the Central Bank print money to fulfill Putin’s investment plan
The Ministry of Economy has drawn up a plan for where to get 13 trillion rubles of investment in order to fulfill the task set by the president - increasing investment over ten years (by 2030) by 70%. One of the proposals is to use the Central Bank’s printing press to finance projects important to the state, VTimesfound out . The Central Bank itself is categorically against it.
The Ministry of Economic Development's proposals on various ways to stimulate investment growth in Russia are described in a letter to Deputy Prime Minister Andrei Belousov from First Deputy Minister of Economy Andrei Ivanov, which VTimes reviewed. They offer a number of new mechanisms for investing in large investment projects and new benefits for those who will invest money in them.
Issue of the Central Bank. The Ministry of Economy in the letter for the first time proposes to the Central Bank to carry out a money issue, through which investors in large and important projects for the state will be compensated for capital costs. A similar proposal was made in 2017 by the Stolypin Club, led by Boris Titov, VTimes recalls. Then both the Central Bank and the financial and economic bloc of the government were sharply opposed, and now they have not changed their position, VTimes sources say. A representative of the Central Bank told VTimes that the proposal cannot be supported, as it undermines the foundations of the macroeconomic policy of the government and the Central Bank: the issue will lead to increased inflation, and the Central Bank’s actions to combat inflation will lead to higher rates for other loans.
Preferential loans for investment projects. The Ministry of Economy expects to make large projects more attractive for banks with the help of the law on agreements for the protection and promotion of capital investments (SZPK), which was developed by the author of the letter, Andrei Ivanov. Thus, the ministry proposes to include bonds issued for SZPK projects in the Lombard list of the Central Bank, give banks the right to improve the quality of loans issued to such projects, and also not take into account the risks of the parent company when forming reserves for them. The Central Bank is against it here too - the Lombard list cannot be used for other purposes, and the revision of risk ratios for loans threatens the stability of the banking sector.
SPP projects are also being asked to be allowed to issue bonds backed by future government payments (for example, subsidies for new infrastructure), remove the cap on preferred shares (currently no more than 25%) and allow the issuance of shares that give the right to multiple votes on certain issues. .
Tax benefits. The tax regime for investment projects is proposed to be made as flexible as possible, up to different rates of income tax depending on how the company manages it, and at the same time as stable as possible, VTimes writes. The law on the SZPK already has a stabilization clause for income tax, VAT and other basic taxes, and now the Ministry of Economy proposes to add a mineral extraction tax here - this will allow metallurgical projects under the SZPK to avoid the upcoming sharp increase in the mineral extraction tax. New projects are proposed to be given large tax deductions - thus compensating for R&D, interest on loans, and the costs of creating infrastructure. It is proposed to soften the conditions for zeroing the tax rate on dividends - now for this you need to own 50% of the company for at least five years, and the letter proposes to reduce the period to three years.
Benefits for private investors. The letter also offers benefits for private investors, some of them quite significant. The already profitable individual investment accounts (IIA) should become much more profitable - it is planned to remove the limit on the amount of contributions from them (currently 1 million rubles) and reduce the three-year period during which you need to keep money in the account in order to receive a tax deduction. For people who invest in shares for a long time, it is proposed to introduce a regressive dividend tax rate - the longer they hold securities, the lower the tax, down to 0%. A new deduction for the entire amount of income from the sale of shares or interests is provided for investors who own more than 10% of the company and invest dividends in the capital of the project company.
New powers of the Ministry of Economy. The letter proposes to separate “the powers for the development of capital markets, investments, securities and digital assets” from the regulation of capital markets (that is, from the Central Bank) and concentrate them in the Ministry of Economy, which will create a new Investment Development Agency for this purpose. It is not clear from the retelling of VTimes what kind of powers we are talking about, but it is obvious that the Ministry of Economy and the author of the letter, Andrei Ivanov, are asking to transfer part of the powers of the Central Bank to them.
Experts interviewed by VTimes say that the proposals will help increase investment, noting tax benefits. But some of the ideas of the Ministry of Economy - primarily the financing of investment projects through the issuance of the Central Bank - predictably surprise them. It is worth discussing the issue only when there are no other opportunities to reduce the cost of money; this proposal will jeopardize inflation targeting and create risks for the budget, Natalia Orlova, chief economist at Alfa Bank, told VTimes.