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Sochi Lawmakers Attempt to Save Failing Olympic Venues With Tax Break

Published: May 13, 2014 (Issue # 1809)



  • The tax break on Olympic venues means the regional government will lose 4 billion rubles.
    Photo: A. Makhonin / Vedomosti

Sochi's Olympic sports venues and hotels have been exempted from property tax for two years by the regional government, a move that analysts say simply reflects the hopelessness of their financial position after the Games.

According to the law, which came into force on May 6 and was published on the website of the Krasnodar region's Finance Ministry on Monday, all Olympic buildings will be freed from corporate property tax until Jan. 1, 2015. The term "Olympic buildings" is defined generously — sporting venues, the Olympic village, the Games' media center and the Russian International Olympic University in Sochi will all be exempt, as well as transportation and engineering infrastructure and hotels built as part of the government-driven construction.

According to a ministry spokesperson, by lifting the tax — set locally at 2.2 percent of the net value of a company's assets — the regional budget will miss out on some 4 billion rubles ($114 million), money it hopes to get back from the federal budget.

However, considering the indebtedness of many of the Olympic facilities in Sochi, analysts doubt the tax break is really voluntary. Most of them do not have the money to pay, said Ilya Volodko, CEO at consulting company MACON Realty in Krasnodar.

"Neither state-funded nor privately funded Olympic venues can generate income, so it would be impossible for them to pay the tax," he said. "They would be subsidized by the government in one way or another anyway."

The government sunk more than $50 billion into preparations for the Sochi Games, and encouraged billionaires like Oleg Deripaska and Vladimir Potanin to invest heavily in infrastructure. Construction was plagued by cost overruns, and private investors were granted huge loans by state-owned Vneshekonombank. Many of these have since been renegotiated, and the resort is struggling to attract enough tourists to fill its hotels in the aftermath of the Games, which were held in February.

Nikolai Kazansky, managing partner at real estate firm Colliers International, welcomed the tax break, saying it would "lower significantly the tax burden on investors." But the government should apply the exemption only to those venues with the longest return on investment periods, he added.





 


ALL ABOUT TOWN

Monday, Jan. 26


Feeling stressed by the crisis? The Northwest Coach University at 3 Ulitsa Vostsstanaya is hosting a master class by lifecoach Tatiana Almazova. She will shed light on the coaching process, the usefulness of coaching during times of economic downturn and how coaching can improve your career and business prospects. The event starts at 7 p.m. and admission is free. Pre-register by calling 424 3700.



Discover the State Hermitage Museum's collection of English painting at a lecture by art historian Yelizaveta Renne at the Prince Galitzine Library, 46 Nab. Reki Fontanki. The event starts at 6 p.m. and the lecture will be followed by a concert of arias, songs and duets by English composer Henry Purcell. The event is free of charge.



Tuesday, Jan. 27


Celebrate the 71st anniversary of the end of the Siege of Leningrad on Palace Square with a free concert at 7 p.m. Listen to WWII-era songs and the poetry of Olga Bergholz while you peruse outdoor exhibitions dedicated to life during wartime. The event is capped off by a fireworks display at 9 p.m.



Stop by the Lexica School of Foreign Languages at 73 Ligovsky Prospekt from now until Friday for a free English lesson. The classes start at 7 p.m. and cover all levels, from Beginner to Advanced. Registration by telephone on 7641692 and a desire to improve your skills are the only prerequisites.



Wednesday, Jan. 28



Feel like becoming a publishing mogul? Stop by the Freedom anti-cafe at 7 Ulitsa Kazanskaya today at 8 p.m. where Simferopol, Crimea-based founder and chief editor of the Holst online magazine will talk about creating an internet magaine, including what stories to cover, how find an audience and build a team, where to find inspiration and how to stand out from the crowd. Admission is the normal price of the anti-café — 2 rubles per minute, which includes tea and snacks.



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