Page 13 - RusRPTJun24

with an annual income of 10mn rubles (830 thousand rubles per month) will pay 13% on the first 2.4mn, 15% on the next 2.5mn and 18% on the remaining 5mn. In total, compared to current rates, such a person will pay an additional 302 thousand rubles per year.
The Ministry of Finance’s proposals, on the contrary, do not provide for a minimum income tax-free threshold, which most often exists with a progressive scale. Instead, a targeted measure has been proposed - a refund of 7% of the 13% of personal income tax paid to families with two or more children and an average per capita income of up to 1.5 subsistence minimums per month.
The exception is the income of “SVO participants”, received by them in the form of monetary allowances and other additional payments related to participation in hostilities. They are not subject to the increase in personal income tax.
It is important to note: the introduction of a progressive personal income tax scale will bring relatively little to the budget - 533bn rubles in 2025. This is only a fifth of the amount that the state plans to earn from tax reform.
In general, after tax reform in Russia, there will still be the least progressive personal income tax scale in the BRICS countries, notes Alexander Isakov, chief economist at Bloomberg for Russia. The upper tax rate in Russia (22%) will still be lower than in Brazil (27.5%), India (30%), South Africa and China (45% each). But this means that taxes will still have to be increased.
What else does the Ministry of Finance offer?
The main proposal from a fiscal point of view is to increase the income tax from the current 20% to 25%: this will give the budget 1.6 trillion rubles out of 2.6 trillion in additional revenue from the entire reform.
If you believe the words of the head of Business Russia, Alexei Repik, said last week, the final decision of the Ministry of Finance on income tax turned out to be maximally beneficial for large businesses. At hearings on the reform in the Duma, Repik said that two options were being discussed: either an increase to 25–26% “for everyone indiscriminately,” or to 30%, but with a deduction that would allow a tax reduction depending on the volume of the company’s investments. Business representatives insisted on the second option - and in the end they received both a 25% rate and an investment deduction.
There is more good news for wealthy people. Personal income tax on income from dividends, deposits, sales of securities and participation interests, as well as sales of real estate will not be subject to a progressive scale. The tax on such income will be set at 13% for amounts up to 2.4mn rubles and 15% for amounts above - but without further progression. The Ministry of Finance explains this by saying that incomes for the rich are already rising due to an increase in income taxes, and maintaining low rates on income from dividends and securities will help stimulate the growth of the stock market.
For small businesses, a more complex scheme has been proposed - the threshold of the simplified taxation system (STS) regime is increased from 265mn to 450mn rubles of income and 200mn rubles of fixed assets, but the
13 RUSSIA Country Report June 2024 www.intellinews.com