Monthly Newsletter

Russia's financial market regulator, the Federal Financial Markets Service, is calling for the abolition of taxes on income from domestic securities as part of a plan to transform Russia into a major financial centre by 2012.

According to a draft document obtained by the Reuters news agency last week, the roadmap for the development of the Russian securities market to 2012 includes proposals to abolish income tax for individual investors on such income, and profit tax for brokerages and banks.

Russia's stock market is currently the world's 12th largest by capitalisation at USD1.35 trillion, but the document calls for Russia to become home to the fifth-largest stock market by 2020.

The regulator wants to see legislation giving effect to new types of securities in Russia, including asset-backed securities and derivatives. It also observed that there is a need to reduce administrative barriers, to simplify the registration procedure for foreign issuers of securities.

As well as acting as an incentive for more investment in the stock market, it has been argued that the proposed measures could discourage Russian businesses and investors from distributing profits through offshore companies, and lead to a reversal of capital flight.

It is thought that incoming President Dmitry Medvedev is supportive of tax cuts for investors in the stock market. However, the Finance Ministry, which has jurisdiction over fiscal measures, is known to be opposed to the idea.