To reduce 8% of insurance contributions and to raise to 4% value added tax – this proposal was voiced by the Ministry of Finance. It will not lead to the loss of budget revenues, but will push the real economy towards growth and “whitewash” part of wages. However, in case of realization of this idea will come a number of unpleasant consequences, especially for the poorest segments of the population.
Finance Minister Anton Siluanov has proposed a new tax reform. On the one hand, to reduce the burden on labor by lowering insurance premiums from the current 30% to 22%, on the other – to increase the value added tax from the current 18% to 22%, reports “Interfax”. Earlier, the economy Ministry has proposed another option – to increase the personal income tax to 15% and introduce a tax maneuver with the formula “21 on 21”, equating the interest rate, VAT and insurance contributions, wrote the newspaper “Vedomosti”. But the Finance Ministry his vision.
“This measure is aimed at improving the economic conditions of the real economy”
Finance your version is closer in the first place because of the budget formula “22 22” will be neutral, the budget will lose nothing: lower premiums kompensiruet VAT increase. This office is aware that the growth of indirect taxation (VAT) of 4% will lead to higher prices. But according to Siluanov, this will be a one-time price increase by 2 percentage points
Changes in the tax system should not be expected immediately. While there are only discussions and build a common position. As expected, the actual changes in taxes can come into force after the presidential election – from 2019.
What this tax maneuver and what consequences it will lead?
“From the point of view of a state VAT is more free source of financing than insurance premiums. Therefore, for the Minister siluanova this maneuver is more interesting”, – said the newspaper LOOK Chairman of the MIRBIS Djomart Aliyev. But for the people and businesses the consequences can be both negative and positive.
The managing partner of the group of legal and accounting firms “SBP” Olga Ponomareva believes that the business and population to the Finance Ministry’s proposal will bring more harm than good. “Will benefit only the state, but winning this one will be short-term properties. The money will start to flow into the Treasury in the here and now that the budget in times of crisis is extremely important,” says Ponomarev. And all because insurance premiums are collected traditionally worse than the income tax. The mechanism of VAT collection is streamlined much better.
“For the population and for pensioners this is a clever initiative of the Ministry of Finance will unambiguously result in higher prices, as any trade will shift the VAT increase to consumers”, – added the lawyer.
Higher inflation at 2% with an increase in VAT rates 4% is not very significant. However, for a large group of vulnerable citizens it will be noticeable, said the newspaper VIEW managing partner of the audit company “2K” Tatyana Kasyanov. “The increase in VAT will undoubtedly lead to higher prices,” she says. Perhaps the government hopes the efficiency of targeted assistance to the poor, says Kasyanov.
“If in the case of salary one can expect that the reduction of social security contributions in the long term will lead to a correction or to increase the salaries, in the case of pensions say this is impossible. For pensioners and for those who have a low income, the increase in value added tax will lead to a significant deterioration of living standards,” – said the head of “fiscal policy” the Economic expert group Alexander Suslin, reports “Prime”.
The business community, this initiative of the Ministry of Finance hardly will cause delight, because to raise taxes at this time is not the best solution, judging Ponomareva for their customers. She expects it may even lead to a reduction in the number of businesses. And to the “whitewashing” of wages lower premiums will not lead – just some tax optimization schemes will be replaced by others, the lawyer says. Therefore, growth of the Russian economy, this tax reform is unlikely, concludes the source.
However, Kasyanov, on the contrary, the business sees an opportunity to get additional stimulus for development. “The government is trying to induce economic growth through increased investment. Reducing the tax burden on employers will lead to the release of additional funds that you can invest in the development of the business,” she says.
“This measure is aimed, in my opinion, to stimulate the real sector of the economy. Economic aspects for each business will be different. It all depends on what proportion of the final sales price is wages. What is the share of wages is higher, the positive effect is smaller. Because the smaller the share of wages, the more plus 4% VAT is close to minus 8% from insurance contributions. Reduced source on wages “eat up” four percent VAT. That is, for companies that have the price of the final product salary component is 50 percent or more, the effect of the tax maneuver will be less. And Vice versa. For example, the role of big salaries in consulting,” explains Aliyev.
“The premiums are a little stimulate to increase the productivity. But VAT is actually a tax, it is charged according to the “received VAT minus the VAT paid”. If you increase the volumes of production, thus increase productivity, the effective unit load of your company decreases. If the company consumes a lot of third-party VAT, for example, buys a lot of raw materials, these changes will have a positive effect. That is, for commodity companies is good,” says Aliyev. “Therefore, from the point of view of entrepreneurs I would have supported this initiative”, – concluded the Chairman of Institute MIRBIS.