Press review: China as EAEU’s key bankroller and Russia's wireless anti-terror rate hikes

Izvestia: VATs on foreign on-line purchases to add $1.6 bln annually to budget

Russia’s budget may receive 100 bln rubles ($1.6 bln) in added revenues each year if it imposes a value-added tax (VAT) on purchases made through foreign online stores rather than customs duties, President of Russia’s Association of Internet Trade Companies (AITC) Alexey Fedorov said in an interview with Izvestia. The proposal to replace customs duties with value-added taxes was discussed at a Federal Antimonopoly Service (FAS) meeting focused on leveling out the competitive field for Russian and international Internet stores, the newspaper says.

Foreign companies will be offered to register with the Federal Tax Service and independently transfer 18% of each Russian buyer’s payment. If the companies fail to do so, buyers will pay the VAT when picking up their parcels, which will have been previously opened at the customs. According to Fedorov, the European Union plans to introduce a similar regulation starting in 2020. "Online-stores will benefit from this registration as their packages will pass through customs ‘green channel’," he said.

Russia’s Deputy Prime Minister Arkady Dvorkovich said last autumn that the government planned to develop a mechanism of introducing VATs on international internet stores and submit a draft to the State Duma (lower house of parliament) in the spring of 2017. According to Dvorkovich, the present system does not ensure a level playing field for local and foreign producers.

Nezavisimaya Gazeta: Chinese economic expansion squeezes out Moscow’s lead in EAEU

Almost all member-states of the Eurasian Economic Union (EAEU) have been shifting their economic activities from Russia to China recently as Beijing has increased its share in foreign trade with post-Soviet nations several-fold, while consequently pushing Russia’s down, Nezavisimaya Gazeta reports. China uses investment, loans and purchases to bind EAEU participants, which cannot but force Russia out of the post-Soviet space, particularly from EAEU members and several non-EAEU states in the Caucasus and the Central Asia, the paper writes citing a report by experts from the Institute of Economics at the Russian Academy of Sciences. "The dependence of EAEU states’ economies on China is increasing through rising trade imbalances and their debts to the eastern partner. All EAEU members, excluding Kazakhstan, have a considerable negative trade balance with China," experts from the Russian Academy of Sciences say.

China has surpassed Russia as the first and largest exporter with a number of post-Soviet states, Nezavisimaya writes. "In 2001-2015, China’s role as an investor and supplier of machines, equipment and transport vehicles grew for all post-Socialist countries, particularly in Central Asia. As a result, China is turning into a source of modernization for newly-independent countries, while Russia’s role in this process is declining in a number of states," the research states. "Mutual trade between the People’s Republic of China and post-Soviet countries is largely based on Chinese trade loans, the scale of which used to seriously exceed the amount of direct Chinese investments accumulated by those countries prior to the crisis of 2008-2009," the report said.

Experts conclude that the two neighbors, Russia and China, view integration mechanisms differently, as Moscow "sticks to China-EAEU cooperation," while Beijing "considers it possible and even more efficient to cooperate with each member of the Union on a bilateral basis." China is also working with those countries that do not belong to the EAEU so far, but theoretically could eventually join it, the newspaper writes. Maria Valovaya, professor at Russia’s Plekhanov University of Economics, told Nezavisimaya that "Russia needs to launch a dialogue between China and the EAEU as a whole bloc, taking into account a long-term goal for creating a free trade zone between the EAEU and China."

Izvestia: Russia may be hit by $43.4 mln in crop losses

Due to the unusually cold and rainy summer which has led to poor crops, Russian agriculture producers may be facing up to 2.6 bln rubles ($43.4 mln) in losses, only 0.6-1 bln rubles worth of those funds are insured and may be recovered, Izvestia writes citing National Association of Agricultural Insurers (NAAI) President Korney Bizhdov. "Insurance payments are not going to be high due to a plunge in the number of existing contracts insuring risks in the agriculture sector. In fact, those who will face losses will be agriculture producers who have not insured financial risks who will definitely apply for direct payments to the regional and federal budgets," he told the publication.

The number of contracts to insure agriculture risks sealed in the first quarter of 2017, decreased 20% year-on-year, Izvestia says citing data provided by the Central Bank, and only 84 contracts out of over 20,000 were concluded with state support. The rate of insurance amounted to a total of 908 mln rubles, or $15.1 mln, in the reporting period, versus almost 1.3 bln rubles, or $21.7 mln, year-on-year.

The state-run subsidy program which supports insurance payouts for farmers has been in effect in Russia since 2013. Starting in 2017, subsidizes have been allocated directly to the regions, which determine the areas and the amount of funds to be spent. While the previous regulation has been terminated, the new one has not given the Agriculture Ministry the right to apply for subsidies, which has already made 45 regions abandon budget subsidies for agriculture insurance, the newspaper writes. The Ministry has not provided its comment on the problem so far, whereas market watchers are concerned about the risk that farmers could end up not being insured, which is case where major crop losses may result in numerous bankruptcies of small and even mid-sized enterprises.

Kommersant: VEB to expand its banking horizons

Russia’s government has approved a bill to amend a federal law on the VEB development bank, which would seriously change its position on the financial market, Kommersant business daily reports. The state-run corporation may get the right to open and maintain "banking accounts of legal entities, and attract funds of legal entities for deposits upon the government’s decisions," the draft law says. A source in VEB told the newspaper that the amendments will be submitted to the State Duma next week and may be adopted by the end of July.

Currently, Russia’s top development bank can only open and maintain bank accounts of legal entities involved in carrying out its projects, but not attract deposits of companies. However, these amendments would substantially expand VEB’s scope of authority. Nevertheless, whether the issue is a done deal remains to be seen, several experts told Kommersant. "The discussion will continue in the State Duma and is expected to be rather heated as the Central Bank opposes this option," a source familiar with the matter told the publication.

Evgeny Nadorshin, chief economist at Moscow-based PF Capital, deems the regulator’s view to be well-grounded. "The Bank of Russia controls almost the entire financial market, excluding VEB, and cannot influence it through the norms usually used with regards to other banks and participants on the financial market," he said. Other sources familiar with the issue told the newspaper that the Central Bank is only ready to approve VEB’s expended opportunities if transparent and clear rules are specified for the state corporation to deal with legal entities. "For example, VEB may be given the right to attract deposits of those companies slapped with sanctions, which other banks shy away from dealing with," a source in the government’s finance and economy block said. That being said, market players tend to be concerned about potential direct competition with a state-held corporation.

RBC: Russian mobile customers could foot the bill for enforcing ‘Yarovaya law’

The commission on telecommunications and IT of the Russian Union of Industrialists and Entrepreneurs has proposed introducing a "special charge for subscribers and users" of mobile services to be transferred to the operator, which will be allocated on the creation, upgrading and exploitation of the systems required for enforcing the ‘Yarovaya law’, RBC writes on Friday. The initiative discussed at the commission’s meeting on Thursday, July 13, implies a charge totaling 3-5% of average monthly payments. According to the data provided by Russia’s Communication Ministry, revenues from communication services totaled 1.672 trillion rubles ($27.9 bln) in 2015 and 1.657 trillion rubles ($27.6 bln) in 2016, which means the recent proposal may result in customer fees totaling 50-85 bln rubles per year for implementing the controversial package of laws.

A representative from the Communication Ministry, Yekaterina Osadchaya, told RBC that the initiative has not been submitted to the ministry for consideration yet. "This is one of the ideas, it sounds reasonable, though it remains to be seen whether the government will back it," she said. The so-called Yarovaya anti-terror laws initiated by State Duma (lower house) member Irina Yarovaya and Federation Council (upper house) member Viktor Ozerov, obliges communications operators from July 1, 2018 to store data on the receipt, transmission, delivery and processing of voice information and text messages, images, audio and video materials for three years. Operators are obliged to keep "the heaviest" content - images, audio and video data - for six months. They will also be required to supply this information at the request of the special services.

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