The following issues are scheduled for discussion at the Government Presidium meeting on August 11, 2011
1. Guidelines on the Russian Federation’s debt management policy for 2012-2014.
The background material has been submitted by the Ministry of Finance.
The government debt management policy for the period from 2012 to 2014 will focus on financing the federal budget deficit by raising funds in the domestic and world capital markets on favourable terms, ensuring the best balance between sovereign debt duration and yield, maintaining the country’s high credit rating, and providing adequate credit risk benchmarks for Russian corporate borrowers.
The objectives for the government debt management policy for 2012-2014 will include:
- maintaining a balanced federal budget combined with the high degree of debt stability achieved in recent years
- maintaining Russia’s high investment-grade credit rating, seeking to create the necessary prerequisites to upgrade them to A status
- continuing to develop the domestic government securities market
- ensuring constant access for the government of the Russian Federation and domestic corporate borrowers to internal and external sources of loan capital on acceptable terms, and minimising the cost of borrowing
Between 2012 and 2014, the Finance Ministry plans to borrow funds in the domestic market, mainly by issuing government securities to total 6.33 trillion roubles, including 1.98 trillion roubles in 2012, 2.08 trillion roubles in 2013, and 2.27 trillion roubles in 2014.
Russia’s public debt as of July 1, 2011 stood at 4.6 trillion roubles, including 3.6 trillion roubles in internal debt and US$36.8 billion (equivalent to 1.0 trillion roubles) in foreign debt.
Judging by the parameters set forth in the socio-economic development forecast for 2012-2014 and by the planned borrowing targets, the country’s debt stability in the specified period will not reach the risk zone.
The government securities market has demonstrated steady growth in the past few years: today, in terms of securities in circulation, federal loan bonds account for 37% of the domestic debt market. In the previous two and a half years alone, the size of the federal loan bonds market has more than doubled, growing to 2.5 trillion roubles from 1.1 trillion roubles.
At present, federal loan bonds circulate on the MICEX Government Securities sector while corporate securities are traded on the MICEX’s stock exchange.
In keeping with the adopted amendments to the law On the Securities Market, the above restriction will be repealed on January 1, 2012, and federal loan bonds will be traded on both the MICEX and other stock exchanges alongside corporate securities.
Bringing trade in government bonds and corporate securities to stock exchanges will step up trading activities and attract more investors. Trade in both corporate and government bonds at one site will help avoid the division of liquidity, and give investors an opportunity to access assets without time-lags and additional costs.
At present, over 40 organisations in Russia verify ownership of the securities, unlike the majority of countries that have central securities depositaries. These depositaries have an exclusive right to verify ownership of the securities in a country. Many foreign private and public investment funds are not allowed by regulators to invest in countries that do not have an institution responsible for tracking ownership records of the securities centrally. Therefore the Ministry of Finance proposes establishing a central securities depositary with the exclusive right to nationwide verification of securities’ ownership.
To maintain the presence of Russia as a sovereign borrower on world capital markets, a limited volume of Russia’s Eurobonds is planned to be placed in the forthcoming period with due account of current demand. This move will also help track benchmark bond yields in various currencies, primarily in U.S. dollars and in euros.
Under the 2011 federal budget, the Russian government can provide guarantees up to a total amount of 551.1 billion roubles. The volume of government guarantees planned to be provided in 2012 is 482.7 billion roubles, while the target for 2013 is 490.8 billion roubles, and for 2014, it is 299 billion roubles.
In 2009, government guarantees accounted for about 8.6% of Russia’s debt liability and in 2011, the figure is forecast to climb to 17.5% and continue its upward trend in the years to come.
During the planned period, Russian banks and enterprises will still be encouraged to borrow in foreign debt market to finance their activities, with basic premises for this being a shortage of long-term credit facilities in the domestic finance market, the relatively low cost of borrowing in foreign markets and the availability of this source of funding for major companies, particularly those in which the government has a stake. Therefore Russia as a sovereign borrower is keen to provide benchmarks for domestic companies to create favourable borrowing conditions for them. The Ministry of Finance considers it necessary to maintain Russia’s presence in the fastest-growing segments of foreign debt markets. At the same time measures need to be taken to discourage the inflow of short-term hot money to the country.
Government debt management policy for 2012-2014 will be shaped with due account of the need to create the right conditions for domestic corporate borrowers to raise funds in the domestic and foreign markets on the best possible terms and also to ensure effective monitoring of the debt situation in the non-government sector.
In 2002, Russia stopped taking (budget substituting) loans from international financial organisations, focusing instead on implementing projects in the priority sectors of the Russian economy jointly with multilateral development banks.
Over the past few years, the share of liabilities to international financial organizations (IFO) in the structure of Russia’s public debt has been gradually shrinking, reaching 1.8% of the country’s public debt (80.4 billion roubles, or US$2.6 billion) on June 1, 2011.
The loans from international financial organizations account for no more than 0.4% of all the funds borrowed by Russia. From 2012 to 2014, the volume of such borrowed funds will remain modest and is unlikely to top the average of US$300 million a year.
At present, 12 projects worth a total of US$2.3 billion are being carried out under loan agreements with the International Bank for Reconstruction and Development, the European Bank for Reconstruction and Development and the Nordic Investment Bank. Only in two projects, are borrowed funds released to domestic borrowers as term downstream loans to be repaid with interest, while the recipients of other loans are federal executive bodies.
One outstanding issue of the current debt management policy is payouts to citizens to compensate for their lost pre-reform savings. To meet its obligations the government is using funds intended to cover the federal budget deficit, that is, public loans taken out in the domestic market. In 2010, 115 billion roubles were used for this purpose compared to 12 billion roubles ten years earlier. Plans are to allocate 50 billion roubles a year in compensation payouts during the planned period.
2. Draft federal law On Amendments to Part Two of the Tax Code of the Russian Federation.
This draft federal law has been submitted by the Ministry of Finance.
This draft federal law proposes setting a zero rate for the corporate profit tax paid by all resident organisations of the technology-innovative special economic zone to the federal budget for the period January 1, 2012 to January 1, 2018. Another proposal is to consider the possibility of laws being adopted by the constituent entities of the Russian Federation to lower the rate of profit tax payable by organisations to constituent entities’ budgets to at least 13.5%.
This tax rate shall apply to the proceeds from the operations on the territory of the of the technology-innovative special economic zone provided that proceeds (expenditures) received (incurred) in connection with operations carried out on and beyond its territory are booked separately.
This federal law will apply to organisations that locate in such zones on the day of the federal law going into effect and also to those registered as tenants during the effective period of the law.
The draft federal law also provides for amendments to the Tax Code to clarify the details of the procedure for granting tax benefits on corporate property tax and land tax set for the residents of technology-innovative special economic zones.
3. Draft federal law On Amendments to Articles 264 and 272, Part Two of the Tax Code of the Russian Federation.
This draft federal law has been submitted by the Ministry of Finance.
Under the governing laws, for calculating the tax base for tax on the profit, corporate taxpayers shall include all reasonable expenses that are evidenced by the appropriate document, except expenses specified in Article 270 of Russia’s Tax Code. ,
At the same time to preclude likely tax-related disputes, appropriate laws need to be adopted to regulate certain specific issues of accounting for the standardisation of expenses.
Under the draft federal law, expenses for setting not only national standards but also regional standards shall be treated as standardisation expenses, taking into account Russia’s vigorous involvement in the integration processes to create a common economic space (the Customs Union, the Union State and the Eurasian Economic Community).
It is further suggested that only expenses for setting national standards that are included in the national standard programme, and expenses for establishing regional standards that have been registered with the Federal Information Fund of Technical Rules and Standards in compliance with the Russian technical regulation laws shall be considered for profit taxation purposes.
The adoption of this federal law will facilitate developing standards for innovation products, applying them in all the sectors of the economy and boosting the competitiveness and quality of domestic products and services. In addition, this federal law is likely to encourage organisations to get involved in the standards development process and its co-financing.
4. Draft federal law On Amendments to Certain Legislative Acts of the Russian Federation Regarding the Establishment of a Special Procedure for Financing Safety Measures to Protect the Participants of Criminal Proceedings.
This draft federal law has been submitted by the Ministry of the Interior .
This draft law provides for the establishment of a procedure for financing safety measures similar to the procedure for financing investigative activities.
Federal budgetary funds to cover expenses for investigative activities can be used by authorised federal executive bodies in keeping with the procedure set forth in articles 219 and 241 of the Budget Code. The Finance Ministry’s relevant executive orders specify the rules for the Federal Treasury (and its territorial units) to open and manage personal accounts, and also rules for providing settlement services and authorising payments to cover expenses for investigative activities incurred by the recipients of federal budgetary funds.
The proposed amendments aim to ensure confidentiality of information on safety measures to protect the participants of criminal proceedings, as well as a fast response from the federal executive bodies authorised to take decisions on organisational issues concerned.
The provision of proposed financial and logistical support, and the proposed control over the spending of funds allocated for the introduction of government safety measures will be financed under the Government Programme to Ensure the Safety of Complainants, Witnesses and Other Participants of Criminal Proceedings.
5. Draft federal law On Amendments to Article 29 of the Civil Procedural Code of the Russian Federation.
This draft federal law has been submitted by the Ministry of Transport.
This draft law aims to boost the effectiveness of judicial protection of the rights of the Russian ship crew members. The proposed amendment to Article 29 of the Civil Procedural Code provides for the possibility of a crew member to file lawsuits in the area of its ship’s anchorage or home port, seeking to be paid back wages and other sums due to them for their work on board a ship, recover repatriation expenses and receive social security compensation.
In keeping with Article 28 of the Civil Procedural Code, lawsuits against organisations shall be filed in an organisation’s place of business. Consequently, Russian crew members seeking to be paid back wages and other sums due to them can only take legal action in the employer (ship owner) office location (registered address). Under Article 29 of the code, which states that the jurisdiction shall be established at a plaintiff’s option, Russian ship crew members are also not allowed to go to court to recover back wages and other sums due to them in the area of their ship’s home port or anchorage (place of actual location of the vessel).
At the same time, in keeping with Article 402 of the code and the resolution of the plenary meeting of the Supreme Court of the Russian Federation On the Jurisdiction of Cases Arising in Connection with Maritime Claims, cases involving crew members of foreign sea vessels are reviewed by Russian courts in the area of their ship’s location.
Under Article 389 of the Trade Navigation Code, claims for the recovery of wages and other sums due to crew members are treated as maritime claims. Under Article 388 of the code, a ship can only be arrested if an appropriate maritime claim is filed, however, the arrest of a ship is treated exclusively as an injunction that will safeguard claimants’ rights. The decision to issue an injunction to arrest a ship shall only be taken by judiciary after a lawsuit is filed, and in the case of Russian sea ships’ crew members, this can be done the employer (ship owner) registered address.
As a result, unlike their foreign counterparts, Russian ship crew members have no right to claim the recovery of wages and other sums due to them in the area of their ship’s home port or anchorage (place of actual location of the vessel), which puts Russian citizens at a disadvantage compared to foreign nationals.
The lack of direct legislative acts allowing Russian ship crew members to claim the recovery of wages and other sums due to them not only at the seat of the organisation with which they have an employment agreement, but also in the area of their ship’s home port or anchorage (place of actual location of the vessel) on the territory of the Russian Federation prevents Russian sailors from exercising their right to legal protection. The draft law aims to remove this obstacle.
6. Draft federal law On Amendments to Article 165, Part Two of the Tax Code of the Russian Federation
This draft federal law has been submitted by the Federal Agency for Fishery.
The proposed amendment to Article 165 of the Tax Code specifies the procedure for confirming the right to a refund when a value-added tax rate is fixed at 0%, as well as a list of documents that taxpayers need to submit to the tax authorities to confirm they have taken their goods out of the country.
Under subparagraph 4, paragraph 1, Article 165 of the code, to confirm the validity of a 0% tax rate applied to the goods cleared for export and taken out of the country, the following documents, among others, have to be submitted to the tax authorities: copies of transport, shipping and (or) other documents stamped by border customs officials at ports of departure that evidence that the goods have been taken out of Russia, with certain specifics taken into consideration.
However, the specifics of this procedure is that taxpayers, when taking their goods out of the country, need to submit, in addition to other documents, a copy of the order for the shipment of the exported goods that designates the port of discharge and bears the Russian border custom-house’s stamp “Cleared for Loading.”
In the event of exporting marine biological resources, fish and other products made from these resources that were prior to that brought into the Russian Federation without being unloaded on land, the customs stamp “Cleared for Loading” shall not be put on the copies of the orders for the shipment of the exported goods, designating the port of discharge, as in reality the goods in question have not been loaded at the sea port.
Therefore tax-paying fisheries cannot submit an above-mentioned document to the tax authorities to confirm they are eligible for value-added tax at a rate of 0% when selling marine biological resources, fish and other products made from these resources that were previously cleared for export and taken out of the country.
The draft federal law proposes an amendment to Article 165 of the code allowing taxpayers to not submit to the tax authorities a copy of the order for the shipment of the exported goods designating the port of discharge and bearing the Russian border custom-house’s stamp “Cleared for Loading”, when they take out of the country marine biological resources, fish and other products made from these resources that were earlier brought into the Russian Federation without being unloaded on the territory of the Russian Federation.
7. Submitting to the President of the Russian Federation for introducing for subsequent ratification the Protocol on Amendments to the Treaty on Collective Security of May 15, 1992
This draft federal law has been submitted by the Ministry of Foreign Affairs.
This draft federal law proposes ratifying the Protocol on Amendments to the Treaty on Collective Security of May 15, 1992 signed in Moscow on December 10, 2010.
The Protocol specifies the mechanism for using all of the collective security system’s available resources to respond to crisis situations in the CSTO (Collective Security Treaty Organisation) member countries. It also highlights the need to develop and implement measures to provide support for countries in the grip of a crisis to head off any threat to their security, stability, territorial integrity and sovereignty, or to global peace and security.
The Protocol is subject to ratification by virtue of subparagraph “d”, paragraph 1, Article 15 of the federal law On International Treaties of the Russian Federation.
8. On amendments to the Statute on the Ministry of Public Health and Social Development of the Russian Federation
This draft resolution has been submitted by the Ministry of Public Health and Social Development.
The draft supplements to the Statute propose authorising the Health Ministry to support socially-oriented non-profit organisations that provide social support and protection for citizens, and are engaged in healthcare, including preventive healthcare and health protection, activities. It is also proposed to authorise the ministry to compile and maintain a federal register of these organisations.
9. On amendments to the Statute on the Federal Agency for State Reserves
This draft resolution has been submitted by the Ministry of Economic Development.
The federal law On Amendments to the Federal Law On the State Reserve of Material Resources specifies the general principles underlying the creation, distribution, storage, usage, replenishment, and refreshment of stocks in the state reserve of material resources, as well as other relations in this area.
The proposed amendments to the Statute on the Federal Agency for State Reserves aim to harmonise this document with the above federal law, the government resolution On Measures to Improve Federal Property Record-Keeping, and the standard rules governing the federal executive bodies’ internal setup.
10. Allocation of budget appropriations to the Government of the Republic of Dagestan from the Reserve Fund of the Government of the Russian Federation for the Prevention and Liquidation of Emergency Situations and the Aftermath of Natural Disasters to cover the cost of compensating the damage caused when legitimate actions were taken to quash a terrorist attack in the city of Makhachkala, Republic of Dagestan, on December 26 and 27, 2010.
August 10, 2011
* Press releases by the Department of Press Service and Information are based on the materials submitted by the federal executive bodies for discussion by the Government Presidium.