02 September 2010

Conditions for innovation will improve by an imaginary amount

Amendments to the tax Code will not help innovators
Regional business newsThe Ministry of Finance has published amendments to the Tax Code clarifying the rules for taxation of companies in the innovation sector of the Russian Federation.

Aimed at creating favorable tax conditions for them, the bill of the department does not address the issue of compensation for the transition from the UST to insurance payments, Kommersant reports.

However, the amendments introduce a zero corporate income tax rate and personal income tax on the sale of shares of venture companies, if they were previously owned by the owner for at least five years, but experts, welcoming "any steps" that help companies save funds, say that this is too long for venture investments.

On August 31, the Ministry of Finance published a draft law "On Amendments to Parts One and Two of the Tax Code of the Russian Federation regarding the formation of favorable tax conditions for innovation". The project of Alexey Kudrin's department does not affect the issue of compensation for high-tech companies that are worrying the market for the transition from the UST to insurance payments (the increase in rates from 26 to 34% affected them due to a large share of personnel costs). The draft of the Ministry of Finance clarifies only the conditions for granting such a business benefits for determining the tax base and taxes on profits and property of organizations.

So, in the explanatory note, the developers note that if it is possible to apply an increasing coefficient of 1.5 to R&D expenses from January 1, 2009 (to narrow the tax base) in areas approved by the government of the Russian Federation, the Tax Code does not provide a list of such expenses. "The provision of a tax subsidy for such expenses without a clear definition of the list of their articles... It can lead to abuse," the Ministry of Finance notes, explaining that this, "in turn, will lead to the creation of incorrect incentives and discredit the benefits themselves." The draft law defines a list of expenses related to R&D for tax purposes, including, in particular, staff salaries, depreciation and the cost of work under development contracts. The document also provides for the possibility of stimulating the modernization and improvement of energy efficiency of organizations: from 2011 they will be able to receive property tax benefits for a period of three years in respect of newly commissioned facilities with high energy efficiency.

Another innovation: The Ministry of Finance proposes to exempt from corporate income tax and personal income tax income received from the sale of shares of Russian organizations that are not traded on the organized securities market, as well as traded in its "innovative" sectors, if at the date of sale they were owned by the owner for more than five years. Which securities will be assigned to the innovation sector will have to be determined by the government; now they can include instruments traded in the MICEX Innovation and Investment Market exchange sector.

The Ministry of Finance notes that the amendments "are aimed at stimulating long-term venture financing" and private investment in innovation. However, experts are not inclined to overestimate the initiative of the department: "Any step in this direction can only be welcomed – Russia lags far behind other countries in the field of innovation. It is not always possible to achieve such actions from the Ministry of Finance. But this step is tiny," said Anton Danilov-Danilyan, Chairman of the expert council of Delovaya Rossiya, Chairman of the Investment Policy Committee of the Chamber of Commerce and Industry. According to him, the five–year moratorium on the sale of shares in the innovation sector to receive a tax break is too great: "The world of innovation is so arranged that five years is too long. To raise a company and sell it at the stage of transition to serial production, to invest in a new direction, five years is too long, this cycle is two or three years. It's a shame that you have to pay tax. It's a shame that the Ministry of Finance considers the innovation cycle so long. Now, when the handset model becomes obsolete in six months or a year, it is terribly insulting to demand from the owners that they hold the papers for five years and not sell them to venture funds or just companies."

However, the authors of the project themselves note in the financial and economic justification for the document: the falling budget revenues from the introduction of such a benefit due to the five-year "moratorium" on the sale of venture companies will arise no earlier than 2016. Probably, in the conditions of a budget deficit and taking into account the plans of the Ministry of Finance to direct additional budget revenues to the reforms of the pre-election 2011-2012, Alexei Kudrin's office simply cannot allow a decrease in tax revenues.

Portal "Eternal youth" http://vechnayamolodost.ru02.09.2010

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