Transcript:
Igor Shuvalov: Participants in a meeting chaired by the Prime Minister examined the tax policy priorities for 2015 and up to 2017. In 2012, the Government noted that it would not increase the tax burden unless there are emergency situations, and if all Government plans are fulfilled accordingly. When the Government is free to decide on tax reductions, then such decisions will be made.
Today we’ve examined various proposals from the expert community and the Ministry of Finance on the need to adjust some tax requirements.
First, the Prime Minister has confirmed that tax obligations will not increase. And the Government’s 2012 promise remains valid.
In order to confirm this legally, we have decided that we’ll extend this document, the tax policy priorities up to 2017, by one year, that is, until the end of the political cycle. In effect, this document will remain valid up to 2018.
I would like to say a few words about the proposals that were submitted by the Ministry of Finance at today’s meeting. Any proposals dealing even indirectly with possible tax increases were rejected, and it was confirmed that taxpayer obligation should remain the same.
We did not support the expert proposals to study the possibility of increasing value-added tax (VAT) rates or reducing profit tax rates either.
As for dividend taxes and equalising dividend tax rates with those of individual income tax rates, it was decided that these rates should not be equalised today because a 9% dividend tax rate can help us make Russia more attractive at a time when foreign companies will reregister in the Russian Federation.
On the whole, these decisions are quite positive for the business community; they underscore and confirm the most important thing: Tax obligations will not increase. But, as you know, the current situation remains complex. This also concerns the accumulation of federal budget revenue, but the Government continues to honour its promises. Therefore this is a positive decision. We have instructed the concerned parties to finalise the document and submit it to a Government meeting for consideration.
Question: Did you discuss the Finance Ministry’s anti-offshore bill on controlled foreign assets?
Igor Shuvalov: No. Today we discussed a document that usually complements the drafting of the federal budget, and these legislative decisions are designed to increase budget revenues. So we didn’t discuss any decisions that can be developed later, after we adopt this document.
Question: Is this correct that it was confirmed today that taxes will not be increased at least until 2018? Or can this decision be reviewed?
Igor Shuvalov: Not quite. Again, the tax burden will not be increased. But in other words, decisions can be taken for a given taxpayer to reduce some taxes and raise other taxes, but the overall tax burden for this taxpayer will not increase. We have confirmed this principle. Please take note of this very important decision.
Question: Which taxes will be reduced and which will be increased?
Igor Shuvalov: No taxes will be raised at this point. We discussed this issue in terms of priority development areas, and the way this would work at length today. In accordance with the proposal made by the Prime Minister, a preferential tax regime should be effective in these areas until 2025. Today we discussed the taxes, their administration and who will take tax decisions, and we adopted decisions on these issues.
Please wait until the Government meeting for details.
Question: Mr Shuvalov, will the privatisation plan for this year be fulfilled? Which transactions will take place in the near future?
Igor Shuvalov: The privatisation plan has been confirmed in the form that was approved by Government decision. We understand that the capital markets are changing for Russia. We are working with our partners, investment consultants and Russian and foreign banks to understand if there will be enough funds for the companies which the Government will sell, that is, the companies in which it owns a stake. We are receiving conflicting signals. Some show that Western markets have been partly closed for us and will remain closed for some time. At the same time, we see new opportunities for borrowing funds or attracting capital on the Eastern markets. Some consultants said that we will still have an opportunity to attract capital in the West, although this will be more difficult to do.
The job is becoming more difficult for those who are involved in privatisation projects. The list of companies that we plan to sell has not changed. Of course, it will be more difficult to sell them, and so we will need to work more closely with our partners, our consultants.
Question: Are there any projects at the final stage of preparation?
Igor Shuvalov: Yes there are, but we need to decide where we will attract the funds first. You know that awhile ago we adopted a decision on selling shares predominantly on the Moscow Exchange. But we have not closed the door for listing abroad, for example on the New York Stock Exchange or the London Stock Exchange.
All issuers, including those who are not involved in privatisation projects, should consider this issue very carefully. Even those companies which are listed on the New York, London and other exchanges should seriously consider re-registering on the Moscow Exchange. This concerns their economic security and the opportunity to attract funds. We are not going to force or otherwise urge anyone to do so. What we want is to inform them of our opinion.
The Russian Government wants the companies to know that their boards of directors should act in accordance with their corporate procedure to consider the expediency of continued listing on foreign exchanges. If they decide to re-register on the Moscow Exchange, the Russian Government and the exchange will create attractive conditions for doing this. We believe that this will not complicate the attraction of funds and will be the most attractive option in terms of economic security at this point.
Question: Are there any companies that wish to get listed on the Moscow Exchange?
Igor Shuvalov: We are careful in this regard. When major issuers come to the Government to discuss this issue, they say that being listed on the Moscow Exchange or any other exchange that quotes their shares of stock makes more sense to them in the current situation. However, such plans should be discussed by the boards of directors, perhaps, with the participation of investment bank consultants, and only then decisions should be made. Once the decision is taken and starts to be implemented, then we’ll see that this is a real and serious plan. So far, it’s been nothing but words, so I will not give the specific names of the issuers.
Question: What about a scenario where state-run companies have their shares listed on exchanges other than the Moscow Exchange, since there may be more lucrative propositions? Is it possible at all?
Igor Shuvalov: Each time, you need to weigh all of the pros and cons, but frankly I don’t see any good reason for going to foreign exchanges. In any case, especially now, the Moscow Exchange should be a priority destination for placing shares. We must consider all possible foreign capital markets and not rule out those of them that were previously off-limits to us, just because Western markets were more accessible. However, the Moscow Exchange should be our focus.
Question: Were the depository receipts also discussed?
Igor Shuvalov: Of course, they were. When dealing with depositary receipts, companies should know what restrictions may be imposed on them. I have already mentioned that sanctions are not only about legal actions by foreign governments or institutions. They also include the actual market situation. What we are seeing is that the capital market is becoming increasingly complex and off-limits to Russian enterprises. This has already been felt by many Russian exporters and borrowers on foreign markets. We just need to be realists and follow global developments. We should make sure that we do not put anyone on the line, including ourselves, our creditors or our product users. No one should be put in a difficult situation. We need to look for places with affordable capital and identify mechanisms that you can use to receive access to this capital. The Moscow Exchange is a good place for this. Eastern markets are good for borrowing. Even during the crisis, Rusal was able to raise capital by placing its shares on eastern exchanges, even though this is not commonly practiced by Russian issuers. Their placement was quite successful. I hope that with the newly arisen difficulties on Western capital markets, Russian issuers will open up new opportunities for themselves in other markets, including Singapore and others.
Question: What about Hong Kong?
Igor Shuvalov: That includes Hong Kong as well.
Question: Any recommendations..?
Igor Shuvalov: We cannot and should not provide any recommendations at this juncture. We should make every effort to help our companies that want to raise capital on other previously untapped markets. There were no opportunities on such other markets before. We will provide such assistance to companies through the intergovernmental commissions, consultation mechanisms available at the Ministry of Economic Development, trade missions, and embassies. We will provide all of the necessary assistance in order to, first, open doors to such markets for our issuers, and, second, make sure that such capital is affordable to our borrowers.
Question: How will Russia work with foreign banks on privatisation issues now?
Igor Shuvalov: You know, we face important work involving the selection ... not even the selection. We have selected several consultants, including foreign banks. And we never shut ... No one has announced on behalf of the Russian Government any reciprocal measures, such as that Russia will not work with banks that operate using foreign capital. We confirm that anyone who wants to continue working with us are welcome to do so if they fulfill their obligations.
If, for some reason, these banks do not want to continue to work with Russia on privatisation ... For example, last year we carried out the successful privatisation of Alrosa with the help of consultants led by Goldman Sachs. All major transnational banks that are, in fact, also the world's largest investment banks, should confirm that they are ready to openly work with us on privatisation and raising capital. We do not want it to be some hush-hush operation done behind closed doors because someone would be uncomfortable if their governments catch them doing what they do. But we are not closing doors or opportunities for anyone to work with the Russian Government. We are open to everyone. We encourage these banks to continue working with us openly, including on privatisation.
Question: Is there any bank that refused to work with you?
Igor Shuvalov: So far, we haven’t received any information from anyone about their plans to fold operations. We routinely hear confirmations of interest in working with the Russian Government on privatisation during our meetings in the Government and the Ministry of Finance. We want our consultants to provide an official confirmation.
Thank you.
