Russia Takes Aim at Exporters With Tax Targeting Windfall

Russia will impose a new tax on exporters to support its strained wartime budget by soaking up excess revenue companies reap when the ruble depreciates.

(Bloomberg) — Russia will impose a new tax on exporters to support its strained wartime budget by soaking up excess revenue companies reap when the ruble depreciates. 

The levy, which kicks in once the ruble weakens past 80 per US dollar, will be effective from Oct. 1, according to a government statement on its Telegram channel. The tax is aimed at ensuring domestic market supply and will run through the end of 2024, the government said.

Oil, gas, grain and some other goods will be excluded under the plan, leaving industries like metal and mining to shoulder the biggest burden, four people familiar with situation, who asked not to be named while the information wasn’t public, said earlier on Thursday.

The ruble is the third-worst performing currency this year in emerging markets and briefly depreciated past 100 per dollar in August. A weaker domestic currency can boost revenue from exports in ruble terms. 

The new tax will help funnel some of that windfall toward the budget, which remains under pressure from the financial drain of the war in Ukraine. The ruble traded at 95.91 per dollar at 7:46 p.m. in Moscow.

The tax is expected to generate about $1 billion per month at the current exchange rate, said one of the people, who is close to the government.

The government and Finance Ministry’s press services didn’t respond to earlier requests for comment. 

Read more: Russia, Oil Companies Wrangle Over Fuel Costs as War Drags On

The scale for the tax will range from 4% to 7% depending on the exchange rate, while fertilizer makers may be taxed as high as 10%, the government said. 

The lower end of the levy will be applied on revenue when the ruble is weaker than 80 per dollar and 7% when it depreciates past 95 per dollar, according to the government decree.

Read more: Putin Tells Government, Central Bank to Control Capital Outflow

The ruble’s August fall triggered a spat between the government and the central bank over whether to introduce capital controls. 

While the central bank thinks that hiking its key interest rate is enough to protect the currency and make ruble assets more appealing, the Finance Ministry is arguing for tighter restrictions on the movement of capital. In the wake of Russia’s invasion of Ukraine, the government required mandatory foreign exchange sales by exporters, and those companies think the new tax will be a milder form capital control for now, the people said. 

Russian fertilizers and most metals, including nickel, palladium and aluminum, aren’t sanctioned, partially due to their importance for global trade. Some of these exporters are seeing revenues skyrocket, even as they encounter some international clients reluctant to purchase Russian goods. 

Many of the companies have trading units overseas in places like Switzerland and Dubai, making it difficult for Russia to track how much currency they keep in international accounts.

(Updates after government announced its planned tax.)

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