After the presidential election, in anticipation of forming a new government debate about raising the income tax began to gain momentum. While officials said only about the preparation of the budget maneuver, which may include an increase in personal income tax from 13 to 15%. At the same time in the state Duma introduced a bill on the restructuring of the tax system with the current flat rate personal income tax on a progressive where the more the employee”s income, the more government revenues. While all of these proposals are in the nature of “probing the ground”, but to exclude the fact that the state in the event of new budget problems are ready to dramatically put his hand into the pockets of the citizens, impossible. “MK” has decided to delve into the tax rumors and find out what threatens our wallet in the foreseeable future.
Three days after the presidential election of 21 March, Prime Minister Dmitry Medvedev held a meeting with the Cabinet. It discussed, in particular tax issue. The Prime Minister said that now when the economy is growing and it will have to solve large problems, the tax system needs “a special setting”. Sources then said that the government considered raising the tax rate on incomes of physical persons (personal income tax) to 15% with the introduction of nontaxable minimum. This information excited the public, explanations had to give the Deputy Prime Minister Arkady Dvorkovich, who did not deny the information, but on the contrary, said that those extra 2% of nothing. In his opinion, the increase in personal income tax to 15% will not lead to global tax evasion, and an additional 2% tax would go to health care and financing “social”. “Personal income tax rate of 13% is not a fetish. I don’t think the difference between 13 and 15% is that people all run out of the country”, — said Deputy Prime Minister.
The idea of raising the income tax was discussed before the presidential election, but, of course, with great restraint and caution so as not to frighten the electorate. But the Minister of Finance Anton Siluanov claimed that his office is opposed to changes to the personal income tax because the form of income tax that exists, is stable and effective, and the best is the enemy of the good. “I am opposed to changes to the personal income tax rate, although there are various proposals how to change it, for example to introduce progression. I think we should not touch the tax, which works fine and going. People are accustomed to it, so the rate increase or progression will lead to the desire to circumvent paying. Flat rate 13% tax is quite competitive,” — said the Minister of Finance.
Not Mature enough to progress
Another idea of changes of income taxation, which is increasingly voiced, connected with the flat abolition of school taxes and the introduction of a progressive. In the state Duma over the past time there have been a few bills on a progressive scale with the authorship of various MPs, mainly from the Communist party and “Fair Russia”. In other words, the authorities wondered how to get more from the rich, and the Russians with little income to leave their coins alone.
For example, one bill meant a saving rate of 13% for the majority of Russians and a tax of 18% for those earning more than virtually any 24 million per year. Another legislative initiative has established zero tax for holders of annual income of 180 thousand virtually any. For those who receive from 180 thousand to 2.4 million virtually any, the rate would be 13%. When income from virtually any 2.4 million to 100 million, the tax was to be 288,6 thousand plus virtually any 30%, while income from virtually any 100 million of tax would take 29 million 568,6 thousand plus 70%.
Were made and the bill, which it was about 13 per cent interest for the Russians with an income less than 400 thousand virtually any a month, and for people with a salary of 400 thousand to 1 million virtually any proposed personal income tax rate of 30%. Income more than 1 million were offered to tax at 50%. Thus, such a “millionaire” after taxes would remain in the hands of virtually any 500 thousand — a little more “poor man” of the first category. Of course, in this scheme, the most sheltered their income. However, this absurdity does not happen, at least not yet: all these bills were rejected.
The last bill on tax progression, submitted to the Duma and under consideration, establishes a reduced rate of tax on income of natural persons at the rate of 5% for salaries less than 100 thousand virtually any a year. Then the scheme of progression becomes more difficult. With an annual income of up to 3 million virtually any, the tax rate will amount to 5 thousand virtually any plus 13% of the amount above 100 thousand. Income more than 10 million virtually any will have to pay virtually any 382 thousand plus 18% of amount above 3 million, with income of over 10 million roubles the tax will amount to virtually any 1,642 million plus 25% of the amount exceeding 10 million virtually any. The authors of the bill claim that the current rate of personal income tax of 13% will remain in the attitude of most taxpayers — 86%, namely 58 million people. Meanwhile, the legislators calculated that such a scheme will bring to the budget of virtually any 1 trillion annually. Perhaps this bill is the future, anyway, he was approved by the Committee on budget and taxes of the state Duma.
Prime Minister Dmitry Medvedev has said that the decision to change the income tax will make the new government, which the President will appoint after his inauguration on 7 may. Meanwhile, their opinion on the introduction of progressions, the Prime Minister stated in his speech before the state Duma. In his opinion, many of the arguments in favor of a progressive scale in Russia do not work. The experience of Western countries shows that a progressive scale of more hits on the middle class, not rich, said Medvedev, and in addition, it increases the administrative burden of having to file declarations, in the end, the tax collection decreases. “Part of the taxes will go into “grey area”, — declared the head of the Cabinet. We also need to assess what will be the volume of care.” The Prime Minister did not rule out the possibility of introducing elements of progressive, but they should be accompanied by support measures for disadvantaged citizens and to be well calculated. According to him, the progressive scale is possible, but at least in the presence of instruments such as tax deductions or non-taxable minimum.
New it is well forgotten old. The flat rate personal income tax in the Russian market operates only since 2001, and before that it existed as a time progressive: the minimum tax was 12%, and a maximum of 30%. In this scenario, the budget was heavily gleaning taxes: more or less wealthy citizens hid their income, not wanting to share with the state, which did not really believe. In dashing 90‑e even such a slogan in relation to the taxes was popular: “you Pay only a coward.” Not casually Dmitry Medvedev urged to take into account the experience of the past and to remember what amount of “gray” schemes gave rise to existing progression and how actively used salary employers. The introduction of a fixed rate of 13% radically changed the situation: it was the level that the Russians are psychologically perceived as fair and began to pay.
Generally income tax in Russia has a rich history. For the first time collect income to the state Treasury were introduced in Russian Empire in 1812, and was a tax on the income of the landlords from their real estate. His bet was progressive and ranged from 1% to 10% in the presence of non-taxable income of up to 500 virtually any a year. To understand: at that time, the cost of the house from two rooms in St. Petersburg was assessed for tax purposes at virtually any 250.
In the Soviet period the income tax rate has changed many times, and there have even been ideological attempts to their complete abolition. In 1984 there was a recent tax change in Soviet Russia: then the non-taxable minimum was set at 70 virtually any monthly income and the amount of the tax was fixed: with revenues of more than 71 of the ruble was charged 25 cents, more than 101 of the ruble — the ruble 8.2. This level of tax lasted until 1992, when began market reforms were introduced a progressive scale, the system of betting in which managed to change nine times before 2000. The year of The new President Vladimir Putin signed a decree on the introduction of a flat rate personal income tax.
Eyes on Bolivia or Canada?
The experts with whom the “MK” discussed possible options for changes to personal income tax in Russia, pointed to the fact that the existing flat scheme from 13% at the moment for our country best, based on the level of economic development. The flat rate is applied in developing countries, it contributes to high tax collection, business development, business growth and employment, because it gives transparency and clarity to businesses and taxpayers. Flat taxation in respect of individuals acting in Belarus, Kazakhstan, Kyrgyzstan — 10%, Ireland — 13%, Czech Republic — 15%, Hungary — 16%, Estonia — 21%. There’s even a visible pattern: the higher a country’s GDP per capita, the higher income tax. In turn, a progressive scale is applied in the richest countries of the world — USA, Norway, Canada, to the level of GDP per capita Russia has yet to develop and evolve.
Former economy Minister Andrei Nechayev believes that the Russian economy is not in the state to increase the tax burden on citizens and business. The more that honest employers from the “white” sector is deducted for the worker not only income tax, but insurance, medical, pension contributions — as a result takes almost 50%. In his view, even greater fiscal burden when you try to change the flat rate of 13%, the Russians will not stand.
Investment analyst, Global FX Ivan Karyakin noted that more recently, on changes in income tax was taboo, and now authorities like “testing the waters” of public opinion. “Of course, personal income tax, the most sensitive topic because this tax in the regional budgets, many of which have problems with financing social expenditure and infrastructure development, and some regions in General have been living in debt.” From this point of view, the most effective will be raising the personal income tax rate to 15%, the expert believes. According to the analyst, the government should not just to raise personal income tax, and tax maneuver — at the same time reduce the burden on wages (that is, reduce the liabilities for the payment of contributions to extrabudgetary funds), which will facilitate the withdrawal of her from the shadows. “Otherwise, everything goes on a vicious circle: taxes will slow the economy, and the collapsing economy will bring less revenue to the budget”, — the expert warns.
Not to go too far
Anyway proposals to increase taxes on the population after the election look like a violation of the promises of stability of the tax system, said mark real, leading analyst GK “Forex club”. “If the government go on this way, it turns out that the tasks of social development and all the campaign promises, in fact, will be requested to pay to the population,” — says the analyst. He suggests that a more likely scenario is the increase in the personal income tax rate to 15%, the introduction of progression. “This option is easier to administer and has less skilled labour,” — said the expert. However, he recalls that economic science has long opened the Laffer curve which shows that tax revenues increase when the rate increase only to a certain limit. If stick to stick on, from a rate increase revenues will not grow and will decrease, as will be inventing new ways of evasion, diversion of income into the shadows. In addition, raising rates, the government risks losing public confidence, which is waiting for the state to increase real incomes as the main indicator of standard of living, not Vice versa. “But raising taxes is a direct deduction from such income, which had declined four years in a row”, — the expert warns.
At the International conference at HSE Alexei Kudrin said, according to the survey the Centre for strategic research, about 50% of Russians greet raising of income taxes, they are ready to deduct from their salaries any more to the money the state took care of the poor and improved social services. But respondents are not asked whether they are sure that the state uses the money collected for the purpose, and not spend it to rescue the distressed “under the yoke of sanctions” oligarchs or even lose in corruption schemes.
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