The RF Ministry of Economic Development is developing instruments which motivate companies to invest profit into their business instead of paying higher dividends, the Izvestia daily reports. Sergei Belev, Head of the Budget Policy Department, Gaidar Institute is skeptical about this way of discouragement. According to Sergei Belev, the idea to increasing taxes on dividends is on the surface provided that it concerns only large companies.

Addressing the St. Petersburg International Economic Forum, Maksim Reshetnikov, RF Minister of Economic Development spoke about two baseline mechanisms which are expected to make capital investments more attractive than payment of dividends. The first one deals with motivation, that is, the granting of privileges and tax exemptions to companies which make investments, while the second one is about discouragement, that is, to make dividends not so much attractive to the business. It concerns primarily companies which withdraw substantial funds into offshores.

“Increased taxes on dividends discourage those who do not participate in the company’s capital to invest in development. It would be more reasonable to combine a higher tax rate (probably, temporarily) on dividends and profit tax deduction in respect of the invested capital. In other words, those who invest profit in their own business should be granted tax abatements in future,” Sergei Belev says.