Tax Incentives In Sverdlovsk Region of Russia

The government of the Sverdlovsk region of Russia intends to offer tax incentives to companies who were registered in the region after Jan. 1, 2010. 

Experts are voicing fears that the influx of new taxpayers will not be enough to make up for the tens of millions of rubles lost from the budget. Deputies in the Duma suspect that the authorities are lobbying to protect the interests of a single major company. 

The government of Sverdlovsk intends to immediately lower the tax rate on profits by 4.5 points, down to 13.5%. These tax cuts will be in effect for five years (2011-2015) and any legal entity with at least 10 million rubles of capital stock who registered in the region after Jan. 1, 2010 can take advantage of them. 

According to preliminary calculations, the Sverdlovsk region will lose 1.8 billion rubles of tax revenue during these five years, but after that, receipts will increase and should grow by 8 billion rubles between 2015 and 2020. 

This money is vital to the government in the Central Urals. Vitaly Nedelsky, the acting minister of economy and labor, admitted that the regional budget is only in a position to allocate 30% of the necessary funds to carry out targeted programs. The cabinet hopes that the new laws will help plug the hole in the budget. But the officials' numbers and arguments raise doubts among experts. In the neighboring Perm territory, whose industrial potential is comparable to that of the Sverdlovsk region, tax incentives were introduced in 2006, but the results were disappointing.