The government in Moscow is actively exploring new ways to encourage formalization and investment across segments that still struggle with high levels of shadow activity. In recent discussions, senior officials from the Ministry of Economic Development and the Ministry of Finance debated a package of incentives aimed at businesses operating in sectors where informal practices and underground employment are most persistent. These proposals emerged during a broader briefing led by the Prime Minister, with cabinet members reviewing the socio economic picture of the North Caucasus Federal District. The central aim is to create pathways for legitimate operation that can coexist with the region’s distinct economic fabric while reducing the size of the underground economy that often shaves off potential tax revenues and distorts competition across markets.
One of the core ideas under consideration is to design measures that support legalization in areas characterized by a substantial informal sector and considerable employment in informal roles. The leadership of the Ministry of Economic Development emphasized that beyond traditional tax administration, there is room to trial approaches that have shown promise in other parts of the economy. The proposal envisions piloting targeted regimes and simplified processes that lessen the compliance burden for businesses ready to come into the formal system. By making the transition less costly and more predictable, authorities hope to reduce the friction that keeps many operators on the shadow side of the economy and to unlock new revenue streams that can be reinvested into public goods and regional development projects.
The discussion also highlighted the ongoing challenges in the North Caucasus region, where informal activity remains a stubborn feature of the local economy. In addition to tax policy adjustments, there is interest in designing support tools that address the specific needs of small and medium-sized enterprises. The government recognizes that incentives must be meaningful and well targeted, offering a clear, credible pathway from informality to formal operation. By aligning incentives with regional conditions, policymakers aim to foster a more competitive environment, attract legitimate investment, and create job opportunities that endure beyond short-term fluctuations in the cycle.
During the same briefing, Prime Minister Mishustin underscored a broader commitment to strengthening the domestic production base. He announced a forthcoming package of measures designed to help Russian manufacturers secure the inputs and components essential for sustaining growth. The plan envisions additional financing to accelerate the development of promising sectors within the national economy, enabling firms to scale their operations and integrate more deeply into supply chains. The total fiscal envelope under discussion is substantial, reflecting a focus on long-horizon competitiveness rather than temporary relief. This approach seeks to balance immediate support with structural reforms that raise productivity, expand employment opportunities, and promote resilience across regional economies.
Taken together, these policy directions form a coherent strategy aimed at widening the formal economy while maintaining a stable macroeconomic framework. Leaders stress that careful design, transparent administration, and measurable benchmarks are crucial to the success of any legalization program. By pairing tax regime adjustments with practical support measures and strategic investments, the government hopes to create a more predictable business environment. The expected outcome is stronger compliance, enhanced state revenue, and a more vibrant regional economy that can absorb shocks and sustain growth for years to come.