Page 12 - RusRPTJun24

is already at a record high of 81%, at some point post-war this non-productive production will have to be switched back to civilian output.
The investments into the National Projects are intended to start this process now and support pro-growth sectors like construction, to soften the pain of that transition. In general, Putin is also keen to keep life at home as normal as possible to head off any potential protests against the war and its cost to the Russian economy in order to keep his grip on power. Everyday life in Russia has so far been largely unchanged by the war in Ukraine and indeed with nominal wages rising much faster than inflation real incomes have been rising, and that has been fuelling a consumption boom.
2.2 Russia switches to progressive income tax in first major change to tax code in over two decades
The government has decided on a large-scale increase in taxes and the introduction of a progressive personal income tax scale. The increased income tax rate will apply to income over 200 thousand rubles and range from 15% to 22%. Corporate income tax will be increased from 20 to 25%. The government explains the tax increase as a “request for social justice”, but the main income of the rich - for example, from dividends or the sale of shares - will not fall under the progressive scale. The increase should give the budget 2.6 trillion rubles a year, and only 533bn of this will go towards increasing personal income tax. But this is only for now.
Humane progressive scale
The main news is the return of the progressive personal income tax scale, abolished at the very beginning of Vladimir Putin’s reign. Officially, the income tax rate of 13% ceased to be flat back in 2020, but then the increase affected only Russians with incomes over 5mn rubles per year and was limited to an increase in the rate to 15%.
Now the authorities will introduce a full-fledged progressive scale with complex gradations, and the increased rate will apply starting with an income of 200 thousand rubles per month. Of the 64mn personal income tax payers, the increase will affect about 2mn, or 3.2% of the working population, according to materials from the Ministry of Finance.
Personal income tax rates will now be as follows:
for income below 2.4mn rubles per year - 13%; from 2.4 to 5mn rubles - 15%;
from 5 to 20mn rubles - 18%;
from 20 to 50mn rubles - 20%;
over 50mn rubles - 22%.
As is expected with a progressive scale, taxes at an increased rate will only be levied on the amount exceeding each previous threshold. That is, a person
12 RUSSIA Country Report June 2024 www.intellinews.com