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. Last Updated: 07/27/2016

Bill Targets Investors' Tax Exemptions

A bill passed by the State Duma last week is set to abolish tax exemptions enjoyed by Russian charitable organizations and foreign investors alike, analysts said Monday.

The bill, which passed Friday with 332 votes, aims to cancel all exemptions on paying import tax, value-added tax and excise duty that have been obtained by government order or presidential decree.

The bill, which had been rejected by the Federation Council earlier in the month, now needs only President Boris Yeltsin's signature to become law.

But analysts said the president is likely to veto the bill.

Mikhail Delyagin, an economist with the president's analytical center, called the law "absurd" and said it could kill foreign investment in Russia.

A limited number of foreign investors last month were granted a 50 percent break on customs duties on certain imported goods, excluding alcohol and tobacco, under a Yeltsin decree that would be revoked by the Duma law. Manufacturing joint ventures worth more than $100 million and with a foreign stake of at least $10 million were eligible for the break, which local executives said would benefit few firms.

Many Russian charitable organizations have benefitted from another presidential decree, in December 1993, exempting them from the state levies. The breaks were granted to allow the organizations to raise money to fund domestic projects.

Sergei Zhukov, a spokesman for the Duma's budget committee, said Monday the law could raise an extra 3 trillion rubles ($680 million) for the budget and could hardly be a real threat to foreign investment.

"We are speaking only about a few big companies which got special exemption from the president. The law mostly deals with social organizations -- veterans, sports, invalids and so on," Zhukov said.

"The budget is losing huge sums of money because of these unjustified exemptions. It is unacceptable in the present economic situation."

According to Izvestia, exemptions for veterans, sports, invalids and other organizations have cost Russia millions of dollars in lost revenues.

The International Monetary fund and other lenders have urged Russia to raise budget revenues by getting rid of such exemptions as a measure toward reining in the country's budget deficit, which is currently running at more than 10 percent of gross domestic product.