Ministry Seeks Extra Incentives for IT Industry

The Communications and Press Ministry asked the government to provide additional tax incentives for the IT industry to stimulate growth, Vedomosti reported Monday.

In a letter to the government, the ministry proposed that IT companies pay 14 percent of wages in mandatory social insurance contributions until 2020, compared with the 30 percent standard rate. Previously, the lower rate was expected to expire in 2017.

The ministry also suggested expanding the list of those eligible for the incentives.

The ministry proposed providing the benefits to small businesses and startups employing seven or more people. Currently, only IT companies with more than 30 employees are eligible.

It said that, unlike most other industries, IT companies spend 50 to 80 percent on payrolls, so the incentives are necessary for them to operate legally in Russia. The ministry added that it is necessary to support potential engines of economic growth.

The Industry and Trade Ministry, Finance Ministry and Labor and Social Services Ministry oppose the proposal, two federal officials told Vedomosti.

The Finance Ministry said it is willing to discuss a different scheme: a trade-off between social insurance contributions and pension benefits. The ministry proposed either providing full pension entitlements without social insurance incentives or fewer pension entitlements with lower social insurance contributions.

But the question of pension privileges and rights requires further discussion.

"If one category of employees agree, another category might want the same. Then the entire pension scheme will collapse," a high ranking government official told Vedomosti.