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Crimea Offers Scenery and Tax Breaks; Russian Business Unconvinced

Published: May 30, 2014 (Issue # 1813)



  • Waves lapping up against a monument to the scuttled ships of the Black Sea Fleet in the bay of Sevastopol.
    Photo: Denis Abramov / Vedomosti

In an effort to jumpstart Crimea's faltering economy, a government plan could offer tax breaks and other juicy business conditions on the peninsula for the next half century — but even this may not be enough to attract businesses to the badly run-down region.

Russian politicians began talking about creating a special economic zone in Crimea almost immediately after the referendum on March 16, in which more than 90 percent of voters supported leaving Ukraine to become Russia's 22nd republic.

"Our aim is to make the peninsula as attractive as possible to investors, so that it can generate sufficient income for its own development," Prime Minister Dmitry Medvedev said in early April, RIA Novosti reported.

The legislation, which is currently under development in the Economic Development Ministry, provides truly appetizing conditions: residents of the special economic zone are freed from property taxes, land taxes, transport taxes and federal profit taxes, Gazeta.ru reported, citing a copy of the document. These conditions are sure to pique investors' interest, although in the current draft only the largest players will qualify. The price of becoming a resident eligible to receive the zone's privileges costs 150 million rubles ($4.3 million), putting the status effectively out of the reach of small and mid-sized businesses.

"Crimea is a tourism and service zone, the local population earns most of their income through small businesses. The entry ticket should be affordable," said Andrey Goltsblat, Managing Partner of Goltsblat BLP. This issue is already receiving attention: Russian business lobby group Delovaya Rossia has proposed lowering the limit to 70 million rubles ($2 million) for medium-sized businesses and 20 million rubles ($580,000) for small businesses, co-chairman Andrey Nazarov said.

But if the legislation is to achieve its aims at all, it will have to overcome one crucial obstacle that has become the elephant in the room during political and business debates over Crimea. The regions' social and transportation infrastructure has received essentially no investment since the fall of the Soviet Union, and would now be hard put to support an influx of demanding modern businesses.

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ALL ABOUT TOWN

Sunday, Nov. 23


Get in the holiday spirit at today’s Winter Bazzar at the Astoria Hotel. Featuring gifts from around the world such as French eclairs, Dutch cheeses and Indian jewelry, the annual event organized by the International Women’s Club will feature 18 international stands and raise money for charity through the sales of a diversity of products that further illustrate the city’s international connections.



Monday, Nov. 24


Dr. Axel Schulte, Department Head at Fraunhofer Institute for Material Flow and Logistics in Dortmund, Germany, is the featured speaker at the SPIBA Industrial Committee lecture on “The Fourth Industrial Revolution: Digitalization of the Supply Chain.” The event begins at 4 p.m. at the Graduate School of Management at 3 Volkohvsky Pereulok and registration is required by Nov. 21 either by emailing office@spiba.ru or calling 325 9091.



Tuesday, Nov. 25


Tag along with AmCham during their “Industrial St. Petersburg” Tour program today. This incarnation of the ongoing series will visit Philip Morris Izhora and include an Environmental Health and Safety Committee meeting.


Find out how to expand your business east during the “Business With China” forum beginning today and concluding tomorrow at the Lenexpo convention center. The largest Russian forum dedicated to business with the Asian giant, topics that will be discussed include logistics, customs clearance, trade financing and many more.



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