The pandemic has only exacerbated this situation. We had capital outflow of around [USD] 50 billion last year, as far as I understand. Of course, we need to continue fighting this evil very actively from the standpoint of the state. Our position is absolutely unambiguous in this regard, and the chairman of the Federation Council has repeatedly voiced it: taxation should provide incentives for keeping capital in the country, investing in production, investing in cities where manufacturing companies operate, and quite possibly even in social facilities, rather than withdrawing money in the form of dividends, including in offshore jurisdictions — Nikolay Zhuravlev, Deputy Chairman of the Federation Council of the Federal Assembly of the Russian Federation.

Situations when the government urgently begins looking for additional funds for certain things, an additional tax, or some kind of additional penalization have been occurring rather frequently lately, unfortunately, and they are actually leading to the unpredictability of the tax system as a whole as well as economic activity [...] If you think about it, we have increased rates for almost all major taxes: VAT has increased, personal income tax has increased, and the mineral resource extraction tax has increased. Going forward, there are more add-ons – the abolition of consolidated taxpayer groups, losses, and the international agenda for foreign investors. All these things are constantly changing overall, and the reaction of business, of course, is expressed only in fear. Running a truly capital-intensive business is a long-term game. [They] become unpredictable. And this results in the investments that the country needs so badly being curtailed. In general, a vicious circle is taking place — Pavel Kolomensky, First Deputy Chairman of the Russian Union of Industrialistsand Entrepreneurs Tax Policy Committee.

Of course, we are interested in having foreign holding companies that are now located outside the Russian Federation move to Russia, creating additional jobs here, and returning capital to Russia and to Russian banks. And it’s no coincidence that in the past six months we have stepped up work to adjust the tax regime in special administrative regions. I hope that by the end of this year we will come up with a specific bill and submit it to the State Duma. The purpose of this bill is to enhance the appeal of the tax regime in special administrative regions in order to expand the range of foreign companies that can move to a special administrative region, and, accordingly, create attractive conditions that will allow foreign holding companies with Russian capital to move to Russia — Alexey Sazanov, State Secretary – Deputy Minister of Finance of the Russian Federation.

I think that special administrative regions could be a component for not only returning taxes that are spent by quasi-trading companies abroad, but also people who are actually our people and who could live in Russia and return to Russia, and not create substances in somewhere like Switzerland — Aleksandr Shenderyuk-Zhidkov, Director, Sodruzhestvo .

Our currency legislation is really old. It was drafted in the 1990s. Obviously, a lot has changed over this time. It is constantly being fine-tuned and improved. Fines have been reduced, and numerous exemptions for repatriation have been made. But the law is still overloaded. By and large, it’s even impossible to read and requires substantial revision in accordance with the new priorities — Nikolay Zhuravlev, Deputy Chairman of the Federation Council of the Federal Assembly of the Russian Federation.

The first thing we need to do is eliminate the privileges that made such business structuring possible. We are currently revising the agreement on the avoidance of double taxation with transit jurisdictions so that we have these privileged conditions, when it’s essentially possible to pay income from Russia that would be taxed in Russia at rates of 15% or 20% with an effective rate of 2–3%. So, when we level out the tax and conditions, the business is located in Russia and the business is located abroad. We also need to create some additional incentives so that after the tax conditions are levelled out, the business will return here. In this regard, of course, the main thing that we are seeing is the simplification of tax administration in Russia. Here, if a business has any inquiries about how else the tax administration on income tax and on personal income tax can be further simplified, we are, of course, ready and open to dialogue — Alexey Sazanov, State Secretary – Deputy Minister of Finance of the Russian Federation.

Special administrative regions are a very important topic and a very important set of laws that has been adopted. Unfortunately, we aren’t seeing any queues yet. We have a bill prepared by the Ministry of Economic Development that I think is in the government and has very good provisions, in particular, a provision on controlling entities and the invariability of the equity interest and many other things that need to be corrected. But, unfortunately, it’s still in the government and hasn’t been sent to the Duma. It’s essential […] to adjust our national legislation and provide the possibility to preserve the validity of the legislative norms and corporate governance rules of the states from which the resident moved. It seems to be spelled out, but it doesn’t fully work [...] We need to think about how to modernize [legislation] as much as possible for those companies that are ready to relocate, so that it does not constrain the adoption of the appropriate decisions — Nikolay Zhuravlev, Deputy Chairman of the Federation Council of the Federal Assembly of the Russian Federation.

Special administrative regions have also been earning, albeit not a huge amount, but, nevertheless, a noticeable one. During this period, a total of RUB 790 million has made its way into the budgetary system of the Russian Federation, of which I think RUB 276 million is our interregional budget, i.e., about 35%. And, of course, we are very pleased with this fact [...] Several iterations of amendments to this law on special administrative regions have already been introduced, and it’s actually being adopted very promptly due to [...] a number of sanctions-related decisions from the United States and other states. But after that, of course, it has been seriously revised, improved, and modernized, and this has produced results — Anton Alikhanov, Acting Governor of Kaliningrad Region.

In my view, the most important thing here is the legal framework, corporate law, and the ability to use foreign instruments and the currency component [...] Can we reach a compromise here at all? Because for a business that operates in a foreign jurisdiction and would like to get all of the same or most of those things that it has abroad, we need to actually create some kind of not just a tax or economic zone for them, but basically some kind of extraterritorial entity that would correlate very little with the Russian legal system, which, of course, is impossible […] A conditionally successful option can be seen in this, but there is no compromise option. Of course, it’s fraught with certain restrictions, which is why the tool is at a disadvantage for purely doing business elsewhere — Pavel Kolomensky, First Deputy Chairman of the Russian Union of Industrialistsand Entrepreneurs Tax Policy Committee.

It seems to me that the form in which legislation [on special administrative regions] will emerge, God willing, will have the amendments that have already been announced in the press [...] And, of course, I think that the legislation is really stabilizing — Aleksandr Shenderyuk-Zhidkov, Director, Sodruzhestvo .

It’s trite, but a lot of what has been said at the forum today, of course, deals with the investment climate and the invariability of business conditions. A big step has been taken in this regard through the law on investment protection and promotion agreements, and we need to expand it further, ratchet it up in the regions, and further extent the industries that have already been expanded and the reduced thresholds to the regions. We must continue this work. The invariability of the business environment is also very important for the de-offshorization process — Nikolay Zhuravlev, Deputy Chairman of the Federation Council of the Federal Assembly of the Russian Federation.

An investment protection and promotion agreement is, of course, a good tool in and of itself [...] But I think that the very fact that such an instrument as an investment protection and promotion agreement has emerged already pointedly suggests that something is wrong with us, that we are acknowledging a priori that our system is unstable and unpredictable, and we need such radical unique tools to somehow stabilize it — Pavel Kolomensky, First Deputy Chairman of the Russian Union of Industrialistsand Entrepreneurs Tax Policy Committee.