New state regulation tools are needed for the Arctic

24 december 2018

"In recent years we have been seeing more and more differentiation in the Arctic regions in terms of the level of development and availability of financial, materials and labor resources," said Analytical Center expert Rafael Shabaev, speaking at a meeting of the discussion club of the Project Office for the Arctic Development Expert Center.

According to Mr Shabaev, the industrial and export potential is concentrated in a handful of territories of the Russian part of the continent and the existing system of relations between various budget does not stimulate the Arctic regions to expand their tax revenue potential as it does not contain any special budget regulation measures aimed at promoting socio-economic development of the Arctic. As a result we are seeing more and more social stratification and income inequality, which is creating new problems and reducing the overall quality of life. In the end all these processes are further entrenching the raw materials exports model, reducing the competitiveness of the processing industries and fostering conflict between different regions.

 Mr Shabaev suggested drafting and implementing strategic planning documents for the territory, introducing special state regulation tools, including ones for regulating taxes and customs duties and the monitoring the effectiveness of these new tools.

"State regulation tools in the Arctic zone must be aimed not only at attracting new funds to implement investment projects but also at promoting comfortable living in the territories," the expert noted. These, among others, could include exemption from some taxes (such as corporate income tax, corporate property tax, land lax) for persons working on investment projects in the region until said projects are implemented and start turning a profit, offering tax exemptions to companies that build residential housing and the accompanying infrastructure as well as lifting any and all tax duties for goods used in the implementation of investment projects.

In conclusion, Mr Shabaev noted that these tax and customs tools should not be the only measures of state regulation aimed at promoting development in Russia's arctic regions. Thus, the other participants in the discussion noted the role of accelerated socio-economic development territories, core development zones and mineral resources centers in the development of Russia's Arctic regions, identified legislative problems with creating favorable tax regimes in the Arctic zone and shared their experience in attracting foreign investments for the development of the region.