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7 Jul 2023

Jo Harper, DW

Russia: Majority of Western firms with local units continue operating & paying billions in taxes, indirectly funding war in Ukraine; new research shows

Russian bombardment of telecommunications antennas in Kiev

Foreign firms in Russia continue to help fund Putin's war, 7 July 2023

new report by the Kyiv School of Economics (KSE) and B4Ukraine has found that multinationals in Russia continued to pay taxes there in 2022, indirectly financing the Kremlin's war

According to some estimates, sustaining its military efforts costs Russia at least $1 billion a day, a huge burden on Moscow's finances, especially with lower oil and gas prices and sanctions on Russian energy hurting the Kremlin's primary source of income.

According to the report, of 1,387 Western companies with Russian subsidiaries at the start of the full-scale invasion on February 24, 2022, only 241 (17%) have completely exited Russia. Those that have not yet left the Russian market generated $177.2 billion (€162 billion) in revenue in Russia last year, it said.

In February, the KSE published Unfinished Business, an analysis of company exits revealing that over half (56%) of the international companies active in Russia at the start of the war were still doing business there. 

"Almost nothing has changed even after another three months of violence and mounting evidence of war crimes committed by Russian troops; 56% of companies monitored by KSE are still committed to staying in Russia," the report said...

In 2022, global corporations — including those that have exited since the war — together paid $3.5 billion in profit tax on the profits their local Russian businesses generated.

"This is only the tip of the iceberg and likely a substantial underestimate of the total tax bill," the report said, adding that international companies with local subsidiaries in Russia also pay a host of other taxes, including income tax on employees' salaries, social insurance payments and value-added taxes (VAT).

Companies headquartered in G7 and EU countries were cumulatively the highest profit taxpayers in Russia in 2022, representing 16 of the top 20 country contributors.

US firms have collected the largest total revenues in Russia and are the biggest contributors to the Kremlin's coffers through taxes on profits, paying $712 million in 2022, according to the report.

German firms come next. They paid $402 million in profit tax to Russia in 2022. 

Companies headquartered in current EU member states paid $594 million in profit tax, the report found...