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A. J. Haywood

Tax breaks on the way to boost development in Eastern Siberia and the Far East

By The Siberian Times reporter
17 September 2012

Another heavy hint has come from the Russian government that major tax incentives will get the go-ahead despite reservations by some power-brokers.

Vladivostok cargo port. Picture: The Siberian Times

Prime minister Dmitry Medvedev said of plans for the east of the country: 'It is time for us to have courage and create different tax and property regimes.'

'We are more and more convinced that without differentiated tax breaks the economic recovery of the Far East and East Siberia is not possible,' he said. 

He predicted that without tax breaks for these regions, they will not produce the above average growth which is a key government target.

'It is not easy, it might lead, frankly speaking, to significant arguments on government level and between the region, as well as on other levels,' he said.

He spoke of the possibility of a Ministry of the Far East and another body which might 'accumulate money' for development. 

His remarks lack detail but echo those of President Vladimir Putin in Vladivostok at the end of the recent APEC summit. 

'It looks a very tempting solution to set up free economic zones in these huge regions, but knowing our people's talents, there is the risk that the whole Russian economy would then re-register here,' said Putin.

He hinted at carefully targeted tax advantages, for example for new business in the vast region. 

'One option is to offer breaks for greenfield projects,' he said.  

'This is something we will be looking at, and I will ask the government to draft and present proposals. There are other possibilities too. I think that it is too early at this point to discuss them all publicly, since only things that have actually been planned and agreed can really be discussed publicly.'

He stressed: 'We gave Eastern Siberia a zero rate for the mineral extraction tax, given the absence of energy supply and proper infrastructure and the high extraction costs there.

'Something similar needs to be done in other sectors, including the hi-tech sector. 

'We need to offer favourable conditions for greenfield ventures, for example. There are other instruments that we are also considering. By the way, the Far East development programme is one of the few regional development programmes we have, and we will certainly continue it.'

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