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Russia Explores More Private Sector Incentives

Tuesday, February 16, 2010

Russian Vice-Premier and Minister of Finance, Alexei Kudrin, has supported President Dmitry Medvedev's call for more innovation in the Russian private sector with further fiscal proposals to act as incentives. Medvedev had asked the private sector to send in proposals on innovative breakthroughs within two months.

In a supporting speech at a meeting of the Presidential Commission on Modernization and Technological Development, Kudrin expressed his belief that investment in fixed assets needs to rise from RUB8 trillion to RUB14 trillion (USD465bn) a year, an increase from the 20% of GDP invested in 2009 to 30% of GDP in future years.

Kudrin said that modernization requires resources and, at its most ambitious, the Russian government could build up tax incentives for innovation of up to RUB150bn in two to three years.

Kudrin said the government was considering as a further measure to improve private sector finances the possibility of reducing the planned hike in social security contributions from 26% to 32% instead of 34%, which would save corporates around RUB230bn a year. There is also a proposal to make more innovation focused companies eligible for the lower social security rate of 14%, he added. This way the tax burden could be reduced by RUB70bn to RUB100bn. Finally, Kudrin proposed exempting energy efficient equipment from the property tax for three years.

President Medvedev, on a visit to Russia's West Siberian city of Tomsk, had said tariffs were hindering domestic equipment producers' innovation efforts and urged the government to lower customs duties on imported microchips.