US Companies Pay Over $1 Billion in Taxes to Russia Amid Ongoing Ukraine War
U.S. companies that have continued to do business in Russia have contributed more than $1 billion in tax revenue to Kremlin, Newsweek has learned.
American
firms in Russia paid the country $1.2 billion in profit taxes in 2023,
according to figures from campaign group B4Ukraine and the Kyiv School
of Economics (KSE) Institute shared exclusively with Newsweek.
This tax contribution makes the U.S. the largest contributor of foreign
profit taxes to Russia, something a former top U.S. diplomat called
"shameful."
Since Russia invaded Ukraine on February 24, 2022, companies around the world left the country to voice their moral opposition to the conflict and to put economic pressure on Russian President Vladimir Putin's regime.
However, many remained.
Research from the Yale School of Management's Chief Executive
Leadership Institute (CELI) estimates that 123 large U.S. companies
continue doing business with Russia, with various levels of involvement.
KSE Institute, which factors in mid-size and smaller firms, too,
estimates that about 328 U.S. companies remain in Russia.
U.S. companies paid billions in taxes to Russia as its war with Ukraine continues.
Photo Illustration by Newsweek/Getty Images
According to the new
research, the 10 companies that paid the most profit taxes to Russia in
2023 were tobacco company Philip Morris International ($220 million),
beverage corporation PepsiCo ($135 million), confectionary company Mars
($99 million), health and hygiene consumer goods firm Procter &
Gamble ($67 million), confectionary company Mondelez ($62 million),
investment bank Citigroup ($53 million), agricultural company Cargill
($50 million), pharmaceutical firm Johnson & Johnson ($42 million),
independent soft-drink bottler Coca-Cola Hellenic ($34 million) and
oilfield service company Weatherford ($32 million).
Philip
Morris International (PMI) said it suspended planned investments and
scaled down its manufacturing operations in Russia when war broke out.
But in February 2023, the company's CEO, Jacek Olzak, told the Financial Times that he was unwilling to sell the business on Kremlin terms because of the financial hit it would entail.
Mondelez has remained in Russia, arguing that investors did not "morally care" whether companies continued to do business there.
Coca-Cola
stopped selling its drinks to Russia but the bottler in the region,
Coca-Cola Hellenic, sells a product called Dobry Cola via Multon
Partners. Coca-Cola has a 21 percent stake in Coca-Cola Hellenic.
Coca-Cola reportedly applied to re-register its trademarks in Russia in April 2024.
Meanwhile,
PepsiCo, Mars, Procter & Gamble (P&G), Cargill and Weatherford
scaled back their business but continued to produce goods and run
operations it deemed essential, according to the companies.
In
September 2024, Citigroup announced it was winding down operations in
Russia. A Citigroup spokesperson said: "We are actively ending nearly
all of our institutional banking business in Russia, except for those
operations necessary to fulfill remaining legal and regulatory
obligations, while we proceed with the closing of our Russian consumer
banking business."
Newsweek contacted the Kremlin and the other companies referenced for comment.
Dr. Michael McFaul, a Stanford University
academic who also served in the Obama administration, including on the
National Security Council and as U.S. ambassador to the Russian
Federation, called U.S. companies "shameful."
"It
is absolutely shameful that American companies have chosen to stay in
Russia and subsidize Putin's barbaric war in Ukraine," he told Newsweek.
"I hope shareholders in these companies will get more active in
reconsidering the wisdom and morality of financing the slaughter of
Ukrainian civilians. It's not too late to do the right thing."
Some
of the companies' tax contributions to Russia appear to have offset
their humanitarian donations to Ukraine, B4Ukraine found.
PMI has pledged $10 million in aid to Ukraine, $210 million less than the $220 million it contributed in profit taxes in 2023.
B4Ukraine
said that Mars provided $22.5 million in aid to Ukraine, while it paid
more than four times that amount in profit taxes.
American
companies' $1.2 billion tax bill is up from the $915.7 million they
collectively paid in 2021. This is despite a decline in combined
revenues from $50 billion in 2021 to $30.5 billion in 2023.
Mark Temnycky, a non-resident fellow at the Atlantic Council think tank's Eurasia Center, called on Congress
to "impose stiffer financial penalties" on U.S. companies that remain
in Russia, arguing that they "boost the Russian economy," enable Moscow
to purchase weapons and military equipment and undermine "the impact of
international sanctions."
"It indirectly
rewards Russia for its invasion of Ukraine as it implies that invading
another country is normal and that business can remain," he told Newsweek.
"Shutting
down additional Western and American businesses within Russia would
generate less revenue in the Russian market, and it would weaken the
Russian economy. Russia would then have fewer funds to purchase weapons
and defense equipment for its war, and this would lead to a quicker end
to the invasion as Russia would no longer have the economic means
necessary to finance the war."
Hilary
Ingham, professor in economics at the University of Lancaster in the
U.K., said that U.S. companies may be shoring up Russian support for the
war by giving its citizens access to Western goods.
"It
is conceivable that popular support for the war amongst Russians might
be severely hampered if they are unable to purchase U.S. goods," she
told Newsweek.
Aside
from the U.S., the second-largest contributor of profit tax to the
Kremlin in 2023 was Germany as companies paid $693 million in tax to
Russia. Austria came in third, with firms paying Putin's regime $579
million in profit taxes.
Despite pressure,
leaving Russia is not without its problems. The Russian government
charges companies that leave the country a 15 percent exit tax and are
forced to sell their assets at a 50 percent discount. The exit tax
generated $385 million for the Kremlin between January and March 2024.
A
further financial headache for firms who wish to exit the country is
coming. In 2025, the corporate profit tax rate will increase from 20
percent to 25 percent, according to the Russian Tax Code.
Dani
Belo, an assistant professor who teaches international relations at
Webster University in Missouri, argued that U.S. businesses'
relationship with Russia was "normal."
"This
dual reality of fighting with an adversary but also doing business with
them is a normal characteristic of international relations," he told Newsweek.
"Considering how interconnected our world has become, ultimately this
trade in the midst of conflict is not a phenomenon which should surprise
us."
While U.S. companies wrangle with how
to manage their affairs in Russia, the war between Russia and Ukraine
drags on. On the night of December 31 into January 1, Russia launched a drone attack on Ukraine, killing a married couple. Russia lost more than 1,000 troops on January 1, according to the Ukrainian Defense Ministry.
U.S. President-elect Donald Trump, who takes office on January 20, has repeatedly indicated that he could end the war within a day.