Russian business should be prepared to provide financial backing to state spending efforts after Vladimir Putin warned the Kremlin was looking at how companies are using record profits at a time of crisis, the country’s richest man has said.
Alexei Mordashov, the billionaire owner of steelmaker Severstal, said the company would “definitely” take up the president’s recent call for businesses to reinvest their windfalls rather than reward investors.
“It’s important to acknowledge that Mr Putin is our president and the leader of our nation, and he reflects pretty much what every average Russian has in mind,” Mordashov told the Financial Times.
“There is certain public [demand], which is not reflected in hard structures or legislation but there is a certain request . . . There is demand for social justice and inclusion,” he added. “And I believe big business should pay attention to it.”
In a national address to lawmakers in April, Putin took a thinly veiled swipe at companies he felt were banking record profits during the pandemic as poorer Russians suffered, and suggested the Kremlin “may decide to calibrate the tax legislation” in response.
“Some withdraw dividends while others invest in the development of their companies and entire industries,” he said. “We will be encouraging those who invest.”
Most of Russia’s large industrial companies are former Soviet state-run assets now controlled by oligarchs and tycoons. The Kremlin has increased its calls in recent years for these billionaires and their businesses to contribute more to society.
Russia claims its economy has recovered from the pandemic faster than most western countries after the Kremlin declined to impose a second lockdown last autumn — even though officials opted for targeted stimulus payments that cost far less than other countries’ rescue packages.
But Mordashov said Putin was right to call on Russian business to prioritise investment and development as the pandemic adds to a slump in real incomes, which have fallen 11 per cent since 2013.
“We have a lot of legacies of the crisis, when a lot of people have suffered, when we have declining purchasing power, which is a huge problem, one of the biggest problems for our country,” he said.
He said that while political, economic and social life were declining, prosperity among some sectors of the economy was increasing.
As many as 52 per cent of Russians want the state to regulate businesses more aggressively, according to a recent survey by PwC.
Russia’s first deputy prime minister Andrey Belousov last week suggested imposing additional taxes worth Rbs100bn ($1.4bn) on the country’s metals groups, given they profited from high prices last year.
Higher prices meant higher costs for state projects, he said, calling on businesses to return their additional earnings to the government so it could fulfil its state programmes.
However, Belousov walked back his comments after an outcry from the country’s leading metals producers.
Russia’s businesses are ready to pay the price for “the license to operate” Mordashov said, but would prefer to do so by reinvesting their profits rather than paying additional taxes.