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. Last Updated: 07/27/2016

5 Auto Companies Admitted To State Tax-Break Program




Pushing ahead with a plan to boost the automotive sector, Russia has admitted five large joint ventures into a program offering tax breaks for those investing more than $250 million in production.


The decree, signed by President Boris Yeltsin on Feb. 5, would grant practically tax-free status to participants, but still must win a majority vote in the Duma, the lower house of parliament.


Deputy Economics Minister Sergei Mitin said at a news conference Wednesday that he hoped a vote would come this month.


"Within five years, we should have created an entire complex of industries building modern cars," Mitin said.


Foreign investors hoping to take advantage of the breaks must have a Russian partner responsible for at least 10 percent of the investment.


The five manufacturers currently planning to take advantage of the program are Italy's Fiat in a venture with Nizhny Novgorod'sGAZ, General Motors' Opel with AvtoVAZ in Tolyatti, Ford Motors with Leningradsky Diesel near St. Petersburg, the Czech company Skoda with Izhmash in Izhevsk, and DonInvest, which assembles Daewoo cars in the southern city Rostov-on-Don.


Moskvich, in a venture with Renault, also is expected to join the list.


A government-appointed commission, headed by Mitin, will review the companies each year, checking whether each company is meeting its quota in auto production.


Manufacturers getting tax breaks must show the commission that 50 percent of the parts they use are Russian-made, and that the ventures are self-sustaining without the tax breaks.


Also, companies must offer domestically made foreign cars to Russian consumers at considerable discount prices.


International Monetary Fund Managing Director Michel Camdessus attacked the program during his Feb. 20 visit to Moscow, when he passed judgment on the economy before extending the IMF's $10 billion loan agreement.