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. Last Updated: 07/27/2016

Minister: Foreign Firms Won't Get Break on VAT

Foreign firms should not expect any preferential treatment on taxes, even though such a policy may make Russia less attractive to investors, the Minister of Foreign Economic Relations Sergei Glazyev, said Tuesday.

"Our foreign partners should know that we have a value-added tax in this country, and the introduction of the VAT does not discriminate against them but it puts them in the same position as our enterprises", said Glazyev. "I'm not sure why we have to provide preferential treatment for foreign producers".

Russia's VAT was lowered from 28 percent to 20 percent this year, but it was imposed on imported goods. Hard-currency store owners also pay import duties. Glazyev, 32, called past tax exemptions for foreign firms temporary measures that "discriminated against domestic producers".

Foreign firms should also expect one day to face the requirement to convert 100 percent of all hard-currency earnings into rubles, said Glazyev. For now though, Russia cannot enforce such a provision, he said.

The hard-currency inspectorate "has no rights, therefore it proved unable to start working effectively", the minister said. Enforcement of such a requirement could drive out some foreign businesses who fear that ruble profits are as good as no profits at all.

Russia will maintain 15-20 percent tariffs for raw materials to make them less competitive on world markets and provide an incentive for them to be sold domestically. In two or three years, such tariffs will be phased out, he said.