Russia Again Puts Hold On Timber Export Tax Rises

by Tatiana Smolenskaya, Tax-News.com, Moscow

28 October 2009

Russian Prime Minister Vladimir Putin has announced that export taxes on raw timber will not after all be raised by 80% in 2010 as had been announced.

Putin told a press conference in St Petersburg that the slump in demand for round timber during the present economic crisis was the cause for the standstill, and hinted that it might be extended a further year into 2011.

"Russia has approved 75 priority timber investment projects with total financing of about RUB430bn (USD15bn). Their implementation will help process 68 million cubic metres of timber annually," Putin was quoted as announcing.

In 2006, Prime Minister Putin put in place a three-year plan of steadily rising export taxes to transform the timber industry from one based on exports to one based on harvesting and processing timber domestically.

The extra revenue generated by 2007 tax increases was channeled into developing facilities within Russia with the aim of processing Russia’s lumber locally. The next rise on April 1, 2008 saw duties increase by a further 5% to 25%.

In an effort to avoid the export tax, increased foreign investment from foreign lumber mills was expected, with companies setting up in Russia and selling their processed wood locally.

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