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Sunday, October 23, 2016

A new attack on the Kremlin, the Americans reported about the growth of Russian personal income tax

The American edition of WSJ, citing senior Russian officials announced that in 2018, after the elections, the Russian government will increase the tax on income of physical persons from 13% to 20% and the value added tax.

photo: Gennady Cherkasov

Tax increases — “sore spot” for the Russian government and the Kremlin. This is understandable. Revenues from oil exports are falling, the ruble is declining and the Federal budget deficit by results of 4 months of 2016 exceeded 4% of GDP. Many of the “hotheads” in the government propose to raise taxes now. So, the Duma fraction of the Communist party requires the return of a progressive income tax. A number of experts are encouraged to enter the so-called “tax on the unemployed”, that is, to oblige the latter to pay the taxes to the pension Fund and mandatory medical insurance. Initiatives are contrary to the promises Putin not to increase taxes until 2018.

But in fact, taxes are rising. Regions introduce cadastral valuation of land plots and real estate, both physical and legal persons, which increases payments to the municipal budgets several times.

The question arises: WSJ law and taxes we will increase or is it a provocation?

Let’s face it. Let’s start with the alleged increase in personal income tax. If you believe the American edition, this can be accomplished in two ways: a return to the progressive scale or the total increase in the tax rate from the current 13% to 20% for all taxpayers.

In the latter case, respondents “MK” taxpayers sent the plans “long walk.” What the authors of the WSJ, in fact, expected. On the one hand, American experts are right. By 2019, the Russian economy finally begin to grow. Then, logically, will increase and wages of the population. But then the workers suddenly take away 7% of revenues. With our low salaries is comparable to ruin. Perhaps the authors of the WSJ in this moment a little overdone and not fully understand their Russian informants.

It seems more realistic plan to return to the progressive scale. But recall that the introduction of a flat rate personal income tax have significantly increased the collection of this tax and have significantly reduced the “informal sector” in our country.

By the way, a progressive scale is also a relative term. Now the employee receiving 100 thousand rubles. per month, pays a tax of 13 thousand the One who gets the 1 million — 130 thousand Exactly 10 times more. Isn’t that is a progressive scale? More importantly to once and for all was eliminated the “informal sector” to the taxes paid by all, and the salary “in envelopes” was to transfer less profitable than on the card.

With VAT, the situation is more shocking. This is the most harmful tax squeezes the last juices from the same manufacturing industry that now provides the long awaited import substitution. In 2006, the VAT rate decreased from 20% to 18%. Although the then Prime Minister Mikhail Fradkov demanded 13%, but lost the battle with the then Minister of Finance Alexei Kudrin. And if the 2019 bid to return to the same 20%, then the Russian “processing” you can put a cross.

Thus, the WSJ article, most likely, the next information attack on the Kremlin. The most effective option is GDP growth, which will increase the tax base. But the American edition of this, of course, is silent.

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