Decrease in Crude Oil Sales Revenue Due to Western Sanctions
Fiscal Deficit Reaches 52 Trillion Won in First Half of the Year
Russian President Vladimir Putin, whose funding sources have dried up due to the Ukraine war, is imposing a windfall tax of 300 billion rubles (about 4.5 trillion won) on oligarchs.
According to major foreign media on the 13th (local time), the Russian government has unveiled a draft bill to impose a one-time tax of up to 10% on large corporations that have earned more than 1 billion rubles (about 15 billion won) annually since 2021. With the implementation of this measure, the Russian government expects to secure a total tax revenue of 300 billion rubles.
Andrey Belousov, Russia's First Deputy Prime Minister, told the Russian economic media RBC, "This idea did not come from the government but from the companies," adding, "Companies are smart. They are well aware that enormous excess profits occurred in 2021-2022." He explained that companies with huge profits are voluntarily willing to pay additional taxes as a patriotic act.
However, the real situation is different. Russia has been under financial pressure as the Ukraine war, which began in February last year, has prolonged. Due to Western sanctions on Russian crude oil, oil sales revenue has decreased, and war expenses have ballooned. As a result, a fiscal deficit of 3.41 trillion rubles (about 52 trillion won) occurred in the first half of this year alone. In this situation, foreign media analyze that the government intends to collect taxes from oligarchs to cover war expenses.
This is not Russia's first attempt to impose a windfall tax. Previously, in 2018, the Russian government imposed a windfall tax on metal, mining, and chemical companies to fund social welfare costs but withdrew it after stock prices plummeted.
Experts expect that Russia's metal and fertilizer industries will suffer the most from this additional taxation measure. After the war, most Russian oligarchs have been sanctioned by the West, but some industries and agricultural oligarchs with significant importance in the global supply chain had so far escaped sanctions. However, if they have to pay taxes going forward, they are likely to become targets of international sanctions for supporting war funds.
Timur Nigmatulin, a researcher at the Russian investment firm Pinam, predicted, "The imposition of the windfall tax will not be publicly disclosed," adding, "It is intended to minimize the risk of companies being sanctioned for supporting the war."
Russian companies have opposed the government's additional tax collection. One Russian oligarch criticized, "I cannot understand the government's thinking," and said, "If money is needed, taxes should be raised. I cannot shake the feeling that (President Putin) has deceived everyone once again, including himself."
One foreign media outlet noted, "The additional taxes collected by the Russian government will not be directly used as war funds by President Putin," but also pointed out, "The new tax shows that the Russian government is strengthening its control over large corporations."
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