Russia introduces new exchange-rate-linked export duty from Oct. 1

A new set of Russian export duties linked to the rouble-dollar exchange rate will be introduced on Oct. 1 and last until the end of next year, the government said on Thursday. "The decision will help protect the domestic market from unjustified price increases," a government statement said. In the case of fertilisers, the duty will range up to 10%. A source at an export-oriented company said unforeseen tax changes discouraged investment.

A new set of Russian export duties linked to the rouble-dollar exchange rate will be introduced on Oct. 1 and last until the end of next year, the government said on Thursday.

"The decision will help protect the domestic market from unjustified price increases," a government statement said. "The regulation is being applied in order to maintain a rational ratio between the export of goods and domestic consumption." Seven sources told Reuters that the budget could get an additional 600 billion roubles ($6.3 billion) per year from the extra tax on exports of fertilisers and some metals and other commodities.

Russia has been seeking ways to replenish its deficit-stricken state budget at a time of increasing military spending, while producers have been more inclined to export their wares and earn extra revenue thanks to the weakness of the rouble. Meanwhile the central bank has raised its key interest rate by 4.5 percentage points in the last six weeks to address rising inflation, set to be 6-7% this year.

A government source said the aim of the measure was twofold: to lift the pressure from domestic market prices and obtain additional earnings. The government has already introduced a one-off windfall tax on big business, aimed at raising 300 billion roubles, and earlier on Thursday cited the need to shore up domestic supplies and reduce prices in imposing a partial export ban on fuels.

The new tax will apply to all major export contributors to Russia's gross domestic product (GDP), excluding oil, gas, grains, timber, machine building and scrap metal, according to the sources. The government said the duty would not apply if the rouble - currently around 96 to the dollar - strengthened beyond 80 to the dollar.

Otherwise it would range from 4% to 7%, reaching its maximum if the rouble was weaker than 95 per dollar, as now. In the case of fertilisers, the duty will range up to 10%.

A source at an export-oriented company said unforeseen tax changes discouraged investment. "No one will invest strategically in a country where the ... business conditions may significantly change for one day or retrospectively," the source said, speaking on condition of anonymity as he was not authorised to talk to the media. ($1 = 94.5750 roubles)

 

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