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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

Wednesday, Sept. 3


Although the Peter and Paul Fortress sand sculptures are more central and therefore more visible to the throngs of tourists, the 300th Anniversary Park of St. Petersburgs own collection closes today. The World Collection of Sand Sculptures that have been on display at the park reaches its final day, so fans of the classic beach activity should get there while they can.



Thursday, Sept. 4


Vladimir I. Danchenkov, Head of Baltic Customs, will be in attendance during AmChams Customs and Transportation Committee Meeting convening this afternoon at the organizations office near St. Isaacs Square at 3 p.m.



Friday, Sept. 5


Scrabble lovers and chess masters get their chance to assert their intellectual dominance at the return of the British Book Centers Board Game Evenings tonight. Held weekly on Friday nights, the event gives both board game lovers and those hoping to improve their English the chance to meet, greet and compete. Check out the centers VK page for more details.



Saturday, Sept. 6


Athletes will relish the chance to get the latest gear and try out something new at I Choose Sport, an annual event at Lenexpo forum that plans to welcome more than 30,000 people this week to the international exhibition center. Not only will visitors get to try their hand at various athletic endeavors but they will also be able to peruse equipment that can fulfill their dreams of becoming a champion.


Local KHL team SKA St. Petersburg open their season this evening at home against Lokomotiv Yarovslavl at the Ice Palace arena next to the Prospekt Bolshevikov metro station. See their website for a full schedule and available tickets.



Sunday, Sept. 7


Check out retro and antique cars at Fort Konstantin on Kronstadt Island in the Gulf of Finland at FORTuna, a yearly car festival that highlights the eccentricities of the Soviet automobile industry. A car race, contests and a stunt show will give visitors a chance to rev their engines.



Monday, Sept. 8


This evening marks the opening of the two-week ballet festival High Season at the Mikhailovsky Theater. Check the theaters website for more details about performances and featured dancers.



Tuesday, Sept. 9


Discuss the latest news and issues at the AmCham Hazardous Waste Management Roundtable this morning in the Tango Conference Hall of the Sokos Hotel Palace Bridge on Birzhevoy Pereulok. Starting at 9 a.m., planned topics include the Krasny Bor landfill and waste transportation between Russia and Finland.


Learn more about the citys modern architectural trends at the SPIBA Real Estate and Construction Committees meeting on the topic Contemporary Petersburg Style: What is It? Participants will get the chance to discuss whats in-demand with RBI Holdings Irina Petrova and Lubava Pryanikova, and the current state of the local real estate market. Please confirm your attendance by Sept. 5 through SPIBAs website if you wish to attend.



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