How will the government's agreement with metallurgists affect business
The authorities and metallurgists managed to agree on new tax rules. The agreement is a compromise for both sides for today, the hottest disputes are still ahead.
The head of the Russian Union of Industrialists and Entrepreneurs (RSPP) spoke about the agreements between the authorities and businessAlexander Shokhin, who took on the role of mediator in the negotiations. According to him, the excise tax on liquid steel from 2022 will be 2.7%, the mineral extraction tax rate (MET) on iron ore will be 4.8%. These figures are lower than the Ministry of Finance proposed: 5.5% - mineral extraction tax on iron ore, 3% - excise duty on liquid steel.
"The mechanism itself, of course, during the implementation of these proposals can be monitored, adjusted, and so on," he saidAlexander Shokhin, noting that the rates will be valid for three years.
Shokhin called the discussion on the mineral extraction tax itself "hot", noting that a compromise was not reached on all points. The most difficult issue, which caused the greatest protests of metallurgists, is the taxation of company profits.
We are talking about dividends paid by metallurgists to shareholders. Companies in the industry are popular with investors precisely because of high payments, in 2020 the profitability of the "big three" of Russian metallurgy - Severstal, MMK and NLMK - ranged from 6-9% (tens of billions of rubles annually).
The Ministry of Finance proposed that the taxation of profits should be based on the purposes for which it is used. According to the Minister of FinanceAnton Siluanov, now part of the dividends is being withdrawn abroad, which the state "cannot arrange". "We are interested in the money being invested inside the country," he said.
The Ministry of Finance insisted on an increased income tax rate if it is directed not to capital investments, but to the payment of dividends. The rate, according to the agency, should be differentiated - 25-30%, depending on the ratio of the amount of dividend payments minus investments to the value of net assets of companies.
As a result, the RSPP managed to defend the position of the business, achieving a postponement. "The current version of the bill essentially makes, if not formally illegitimate, then essentially calls into question the actions of the taxpayer that he committed in the previous tax period plus another four years, that is, for five years," Shokhin said.
The final decision is that the retrospective tax on dividends has been removed from the agenda so far and will definitely not be introduced until 2023.
"This does not mean that we would like to put it in a long box. Of course, it is very important to discuss this quickly enough, including because entrepreneurs, investors, and shareholders of companies need clarity in the near future so that they can build investment plans and determine the attractiveness of Russia as a country for investment," the head of the RSPP said.
The business has not yet commented on the agreement. At the same time, a source in one of the companies participating in the meeting noted that "in general, compromise solutions for metallurgists have been reached with the government."
Experts interviewed by "RG" also talk about a compromise between the authorities and business. "The tax conditions turned out to be more lenient than discussed last week. The key wish of the business - not to introduce a progressive income tax dependent on dividends - has been fulfilled. However, in the future, this issue may still return to the agenda in one form or another," said the expert on the stock market of BCS World of InvestmentsIgor Galaktionov. According to his estimates, after an increase in excise taxes and mineral extraction tax rates, steel producers in 2022 can pay about 114 billion rubles to the budget.
The decision embodies the principle of "carrot and stick": the agreement on a small reduction in the mineral extraction tax on steel (from 3% to 2.7%) and iron ore (from 5.5% to 4.8%) sweetened a bitter pill, the essence of which is that the issue of spending companies on dividends is not removed from the agenda, but only postponed, emphasizes senior analyst ATON Andrey Lobazov: "We consider the three-year term of duties to be an acceptable option - it increases the likelihood that they will not become permanent."
According to him, such news is most favorable for Norilsk Nickel and Severstal. In the event of the introduction of an increased income tax, companies, according to the expert, would have to pay an additional $0.4 billion and $0.2 billion annually. accordingly.
For metallurgists, the agreement with the authorities means an increase in the tax burden through excise taxes and mineral extraction tax. "The government's proposals regarding the taxation of excess profits aimed at dividends played the role of a threat rather, and it was postponed, but not eliminated. Externally, the agreements reached seem to demonstrate a changed internal balance in the government, in which the positions of the Ministry of Finance on tax policy are balanced by the position of the economic bloc and the first deputy prime minister - curator of economic growth, and now also the climate agenda," says the director of the Tax Policy Center of Moscow State UniversityKirill Nikitin. "But in practice, it seems that the government has solved the fiscal task, but the task of increasing the rate of investment remains postponed, new mechanisms do not directly solve it."
At the same time, the expert sees nothing wrong with the differentiation of the tax burden depending on the use of income - similar mechanisms operate in many countries, for example in the USA or South Korea.
Dean of the Faculty of Taxes, Audit and Business Analysis of the Financial UniversityVadim Zasko notes that the practice of distributing net profit in favor of paying dividends has a negative impact on the technical re-equipment and modernization of production facilities. Among the risks of the proposed scheme, he also notes the proposal to set excise taxes on liquid steel at 2.7%.
"Being, in fact, an indirect tax, the excise tax will also affect the final pricing policy on the metal market within Russia, which cannot but cause certain concerns against the background of already ultra-high domestic metal prices," Zasko explained.
According to him, it is important that decisions are made in a dialogue between the government and business. "Today we should not talk about any "losses" of metallurgists. Quite objectively, we should focus not on someone's "losses", but on increasing fairness in the taxation system, as well as on the formation of additional sources of budget revenues that allow expanding the range of solutions to state tasks," Zasko emphasizes.
Deputy Head of the HSE Institute of Tax Management and Real Estate EconomicsTatiana Shkolnaya notes that the issue of increasing the tax burden on the metallurgical industry, in fact, was resolved at the beginning of the summer. "We are talking about the introduction of tax incentives for reinvesting profits in the technological renewal of production assets for a long time. I think the industry will act as a trial balloon for the widespread use of tax instruments to stimulate domestic investment," the expert believes.
According to Shkolnaya, it is still difficult to determine the exact figures of potentially possible additional revenues to the budget - everything will depend on the further development of demand for products of the metallurgical industry. However, it is already obvious that we are talking about hundreds of billions of rubles, Shkolnaya noted. The Ministry of Finance expects that in 2022-2024 the budget will receive an additional 546 billion rubles. from metallurgists, coal industry and fertilizer producers.
The HSE expert believes that in the event of an extremely negative development of the tax scenario for the participants of the metallurgical market, there is reason to believe that the decisions will be revised in the direction of easing the tax burden. "To the same extent, we can be sure that government agencies will monitor the development of the situation very carefully in order to prevent manipulation of indicators," the economist stressed.