“For accelerated adaptation”: the government has prepared new measures to support citizens and businesses

The Russian government has prepared new measures to increase the resilience of the economy in the face of sanctions.

This was announced on Wednesday, March 9, by Prime Minister Mikhail Mishustin.

“Today we will discuss a number of legislative initiatives in addition to those that were adopted last week.

All of them are needed for accelerated adaptation to the current situation, support for our citizens and enterprises in a period of turbulence," Mishustin said at a Cabinet meeting.

According to him, the president gave the government the power to prohibit or restrict the import and export of a number of goods "in the face of unfriendly actions" from other states.

We are talking about raw materials, equipment, components and materials.

The Cabinet of Ministers plans to approve the corresponding list of products in the near future.

“This decision will ensure the economic security of our country, guarantee the uninterrupted operation of industry and agriculture,” Mishustin stressed.

As Artyom Deev, head of the AMarkets analytical department, suggested in an interview with RT, the authorities may, for example, prohibit the export of agricultural products from the country to ensure the domestic market.

Such a measure will avoid food shortages and limit the rise in food prices.

At the same time, the government may impose a ban on the import of a number of goods, including agricultural products.

This, according to Deev, will stimulate import substitution and support the development of certain sectors of the economy.

“For sure, the import of goods that we can completely replace on our own will be closed.

This will be a worthy response to countries imposing sanctions on Russia.

The business of these states will also feel negative from the reduction in the supply of their goods to our country,” Deev added.

Georgy Ostapkovich, director of the Center for Market Research at the Institute for Statistical Research and the Economics of Knowledge at the National Research University Higher School of Economics, shares a similar point of view.

In his opinion, in the current conditions, it is necessary not only to engage in import substitution, but also to reorient to new markets.

“We need to minimize the number of imported goods and increase the number of similar Russian-made products.

It is also necessary to reorient imports from the western direction to the eastern one.

It doesn't have to be China.

Asian states, including South Korea, can also provide good products,” Ostapkovich believes.

Package of measures

As part of anti-crisis measures, the government proposed to exempt Russians from paying tax on interest on bank deposits of more than 1 million rubles.

As Mikhail Mishustin recalled, the corresponding norm was introduced from January 1, 2021.

It was assumed that Russians would pay a 13% tax on part of the income on such deposits.

“After raising the key rate, credit institutions significantly increased the interest on deposits, which means that income on them will grow, as well as the amount of tax that would have to be paid this year.

The abolition of such a norm for the payment of interest not only for the past, but also for the current year, 2022 will help support citizens and help save savings, ”Mishustin explained.

In addition, the government is going to simplify the procedure for registering foreign companies in special administrative regions, as well as simplify the regulation of imports.

Along with this, the authorities have developed a set of measures to help the construction industry.

“In the current conditions, our main task is not to let the construction stop.

This is important, first of all, for millions of our citizens who need new houses, apartments, as well as for specialized businesses,” the Prime Minister emphasized.

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• © Alexander Astafiev

The Cabinet also provided for a number of measures to support the transport industry.

As Mikhail Mishustin noted, the authorities will help air carriers maintain a fleet of foreign aircraft and introduce retaliatory restrictions for countries that prohibit Russian ships from entering their ports.

Also, the authorities will limit the influence of international organizations on the railway transport of Russia.

Moreover, the government is going to support the hotel business by zeroing the VAT rate for the industry until July 2027.

At the same time, the authorities want to fix the foreign exchange rate to calculate the so-called thin capitalization.

“Organizations whose activities are financed by borrowing funds will not face an increase in obligations to the state due to an increase in the value of the dollar or euro.

In addition, a number of companies will have the opportunity to switch to paying monthly advance payments based on actual income,” Mishustin explained.

The government is going to provide assistance to Russian motorists.

Thus, the authorities propose to exempt some citizens from paying increased transport tax.

Already this year, the threshold for the cost of a car, from which the so-called luxury tax is levied, is planned to be raised from 3 million to 10 million rubles.

According to Deev, in this way the country's leadership reacts to a noticeable rise in the cost of cars in Russia.

According to various estimates, since the beginning of the COVID-19 pandemic, many cars have increased in price by one and a half to two times.

Against this background, the current threshold for the cost of a car for paying a luxury tax is no longer relevant, the expert believes.

“Now the category of cars up to 3 million rubles already includes not the most expensive vehicles, but the mass market.

Raising the threshold is a technical measure to balance the realities of the car market and the level of tax for owners of really expensive cars,” Deev emphasized.

Sanctions response

Recall that on February 21, Vladimir Putin announced the recognition of the independence of the DNR and LNR, and on the 24th he announced the start of a military special operation to protect the republics of Donbass from aggression from Ukraine.

In response, the European Union, the United States and a number of other states began to impose anti-Russian restrictions.

The restrictions affected the companies and banks of the country, and seven credit institutions were disconnected from the SWIFT international financial messaging system.

The sanctions also affected the aviation industry and the supply of high-tech products to Russia.

Half of the Central Bank's gold and foreign exchange reserves were frozen, Europe stopped the certification of the Nord Stream 2 gas pipeline, and the United States imposed a ban on the import of oil and other energy resources from Russia.

At the same time, many Western companies announced their withdrawal from the Russian Federation.

In total, more than 5.6 thousand restrictions have already been introduced against Russia.

According to this indicator, the country bypassed Iran, Syria, North Korea, Venezuela and Cuba.

Such information is contained in the global sanctions tracking database Castellum.AI.

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• © Vitaly Belousov

Against the background of the imposed restrictions, Vladimir Putin signed a law aimed at protecting the country's economy and the Russians themselves in the face of sanctions.

Thus, the authorities are going to provide citizens and businesses with credit holidays, suspend scheduled inspections of enterprises and launch a new stage of capital amnesty.

In addition, the government will be able to independently carry out additional indexation of pensions, the minimum wage and the subsistence level, if necessary.

Also, by law, IT companies accredited in Russia are exempt from paying income tax, and Russians are exempt from paying VAT on the purchase of precious metals.

At the same time, the Cabinet proposed three options for developing relations with companies wishing to leave Russia.

Thus, the business may remain in the country, temporarily come under Russian control, or be forced to declare bankruptcy.

“We see that a roadmap for government assistance to businesses and the public is being developed.

I do not rule out that all the measures taken are only the first tranche, and there are still other aid packages ahead of us, as was the case during the pandemic.

The main thing now is to stabilize incomes and employment.

I think the state will primarily focus on supporting the low-income population with the help of direct payments and other benefits, ”concluded Ostapkovich.