Several business associations have appealed to the government for support measures in response to Ukrainian UAV attacks on retail facilities. In their appeals to Russian Prime Minister Mikhail Mishustin, lobby groups are calling on the government to expand support measures for both large businesses and small and medium-sized enterprises.
On Monday, at an operational meeting with deputy prime ministers, the head of government instructed officials to work out mechanisms for long-term contracts to supply public transport to Russia’s regions. During the meeting, he recalled that the issue had been discussed at a State Council meeting attended by President Vladimir Putin. ‘The head of state stressed that the financial capacity of the regions varies, and the conditions for co-financing from the federal budget should take this into account. The issue of creating mechanisms that would allow long-term contracts to be signed with equipment manufacturers was therefore discussed. This would help keep industrial companies producing vehicles fully loaded and guarantee orders. Russian regions would then be able to plan the acquisition of vehicle fleets on a stable basis,’ Mishustin said. According to him, about RUB 30 bln is allocated annually from the federal budget to renew public transport in the regions.
The Association of Internet Trade Companies (AKIT) has appealed to Prime Minister Mikhail Mishustin with proposals for support measures for sellers operating through digital platforms who have suffered losses as a result of UAV attacks and other external incidents. ‘Sellers and manufacturers that sell goods through digital platforms have faced systemic consequences of extraordinary circumstances, including damage to logistics infrastructure as a result of UAV attacks and other external incidents. These events are force majeure, but their consequences for bona fide market participants, including the loss of goods, cash-flow gaps, the tax burden on lost assets, difficulties in recovering VAT and uncertainty over the status of insurance payments, require, in our view, coordinated and systemic solutions at the state level,’ the AKIT letter says
The association notes that existing support measures are currently focused primarily on small and medium-sized enterprises (SMEs), while large businesses effectively have no compensatory mechanisms. This, it says, threatens their stability and their ability to continue contributing to the national economy
According to TASS, AKIT proposes recognising lost goods as a loss, exempting businesses from having to restore VAT, granting affected sellers tax and social-insurance payment deferrals or instalments for up to one year, and introducing deferrals for import taxes and duties. It also proposes preferential lending for affected businesses and direct financial support for affected sellers.
AKIT has also proposed a temporary moratorium on inspections, a standardised act certifying the loss of goods, and the creation of a public-private reinsurance mechanism for terrorist and war risks affecting logistics infrastructure.
The Union of Internet Trade (SIT) has made a similar proposal to Mikhail Mishustin, TASS reports. SIT has also asked the government to consider support measures for sellers affected by the consequences of terrorist attacks on the infrastructure of the Wildberries marketplace.
‘A number of pressing issues for entrepreneurs cannot be resolved without the involvement of relevant government authorities. The Union of Internet Trade believes it is necessary to provide a package of temporary state support measures for affected entrepreneurs that would, in our view, preserve existing businesses and jobs and ensure the recovery of entrepreneurial activity,’ the letter to the prime minister says
SIT believes that for many SMEs, the sudden loss of a significant volume of goods creates the risk of cash-flow gaps, overdue mandatory payments, deterioration in credit histories and job cuts. In some cases, it could lead to businesses shutting down.
Another problem is that the process of documenting the scale of losses and obtaining the relevant paperwork can be lengthy, the organisation says. At present, deferrals of mandatory payments and other concessions are selective and unsystematic.
The union proposes granting affected sellers tax and social-insurance payment deferrals or instalments, suspending the accrual of penalties and fines, introducing payment holidays on loans, and allowing preferential refinancing of existing loans.
It also proposes that tax arrears should not be collected from affected businesses during the deferral period. This would include suspending transactions on bank accounts and refraining from other measures that could further restrict business activity. Other proposals include preferential financing to restore working capital, a temporary moratorium on initiating bankruptcy proceedings, simplified procedures for confirming losses, and taking the emergency situation into account when assessing an entrepreneur’s financial position.
Last week, theAssociation of Trading Companies and Manufacturers of Electrical Household and Computer Equipment (RATEK) also put forward proposals to minimise the consequences of UAV attacks on retail facilities and warehouses. It sent its initiatives to the Ministry of Finance, the Ministry of Economic Development and the Ministry of Industry and Trade. RATEK proposed banning the restoration of VAT on goods destroyed in UAV attacks or terrorist attacks on logistics facilities. It also asked that the value of lost goods be allowed to be deducted when calculating profit tax.
Other proposals include establishing a fund for rapid payments to affected businesses to prevent cash-flow gaps; requiring digital platforms to compensate sellers for losses in proportion to the amounts received by marketplaces from insurers; requiring warehouse operators to issue a standardised act certifying the loss or destruction of goods within 10 working days of an emergency; and requiring platforms to display the current status, terms and insurance limits for a particular warehouse in a seller’s account until delivery has been confirmed. The association also proposes creating a national public-private reinsurance framework for UAV and terrorist-attack risks with government budget participation. RATEK said the measures would help ‘prevent excessive tax pressure on large and medium-sized manufacturing businesses’
The Association of Digital Platforms, whose members include Wildberries, Ozon, Yandex, Avito and Kuper, had previously also proposed a package of measures to the government to support entrepreneurs affected by attacks by Ukrainian forces on marketplace logistics facilities. The proposals included direct non-repayable payments from the federal budget based on the actual losses and scale of the organisation’s operations. They also called for tax and mandatory-payment deferrals or instalments for at least six months, as well as a waiver of penalties and fines for the period when entrepreneurs were unable to operate normally.
Other proposals include loan holidays, debt restructuring, allowing affected business owners to suspend payments on existing loans and borrowings for at least six months, and special preferential loans for affected companies to replenish working capital and resume operations. The Association of Digital Platforms also called for the creation or expansion of a system of insurance for property and inventories against the consequences of emergencies and other external threats.
Earlier in August, Russian authorities said they were considering tax deferrals and instalment plans for entrepreneurs whose goods had been damaged at Wildberries logistics facilities. ‘This issue [support for those affected] is currently being discussed by a working group in the government… Different measures are being considered. Once a final decision has been made, it will be announced… Tax deferrals and instalment plans are among the options being discussed,’ Alexei Sazanov, state secretary and deputy finance minister of Russia, said at the time.
At the same time, Russian Economic Development Minister Maxim Reshetnikov said that the Ministry of Finance, the Federal Tax Service and the Central Bank were working together on a number of measures to support entrepreneurs affected by attacks on logistics complexes. ‘Their primary task is to restore and ensure uninterrupted supplies of goods to consumers, and to help suppliers, especially manufacturers, resume operations,’ Reshetnikov stressed.
Experts believe the latest proposals from businesses could substantially reduce entrepreneurs’ losses. ‘However, they are based on the position that major players in e-commerce are victims of the conflict under the circumstances. Put simply, fairness, in their view, requires all their losses to be reimbursed from the budget. A deferral of import taxes and duties, for example, is such compensation,’ says Oleg Nikolaev, a member of the General Council of Delovaya Rossiya.
Analysts at Freedom Global believe direct budget payments, tax concessions and preferential lending could be among the most beneficial measures proposed. ‘Simplifying bureaucratic procedures is also a plus. The authorities are likely to favour this measure most of all, since it would cost the budget nothing. But, of course, affected small and medium-sized businesses will be looking for tax concessions, direct cash compensation and preferential lending, in other words, “real money”. The downside is that not all of these proposals may actually be implemented. The issue of direct budget compensation could prove particularly difficult for the government,’ they argue
The total losses suffered by businesses from attacks on Wildberries warehouses are estimated at nearly RUB 300 bln, or almost 0.2% of Russia’s GDP. ‘It is therefore unclear whether, amid a budget deficit that is growing month by month, the government will be prepared to part with an amount almost equivalent to 0.2% of GDP and pay it out as non-repayable compensation to affected entrepreneurs,’ Freedom Global analysts say.
At the same time, experts believe that paying such a large sum to affected businesses from the federal budget could be interpreted incorrectly by regional authorities.
‘It would mean that funds were found in the budget to help businesses that, under certain conditions, could in principle find money from non-government sources, while some needs of subsidised regions might go unfunded,’ they argue
In their view, it would be fairer for compensation to affected businesses to come from the budgets of the regions where the warehouses hit by the attacks were located.
‘The government could then reimburse the regions for these payments over time. However, if direct payments are made by the state or local authorities, even if they do not fully cover the value of the goods lost by entrepreneurs, they could save many small and medium-sized businesses from closure. At least they would have money to purchase new goods and sell them without taking on loans, even preferential ones, or increasing their debt burden,’ the analysts say
‘Direct budget compensation for businesses is a contentious idea: it is difficult to assess the scale of each loss quickly and fairly,’ says Vasily Kutin, Director of Analytics at Ingo Bank.
Olga Yeremchenko, a senior research fellow at the Centre for Spatial Analysis and Regional Diagnostics at the Presidential Academy, believes that supporting entrepreneurs affected by attacks on infrastructure is particularly important for the resilience of SMEs and regional economies.
‘Tax deferrals, loan holidays and preferential financing will help reduce the current financial burden and minimise the risk of cash-flow gaps during the recovery period. At the same time, the effectiveness of the proposed measures will depend largely on how quickly they are provided and how accessible they are to affected entrepreneurs, including the simplicity and speed of the procedure for confirming losses,’ she says.
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