Page 90 - RusRPTJul24

however, does not go beyond the next three years. The long-term forecast of RANEPA and IEP does not bode well. Among other things, it includes the energy transition and a reduction in oil demand.
Tax wedge: The Ministry of Finance presented the parameters of tax reform in June. The main innovation is a five-step personal income tax scale with rates of 13, 15, 18, 20 and 22%.
But the income tax rate itself does not reflect the entire burden on wages. It is quite possible that you have heard the argument that “in fact, in Russia the income tax is not 13%, but 43%.” When hiring a full-time employee, the employer takes into account not only the 13% tax that he pays for him, but also up to 30% (in the usual case) of mandatory insurance contributions. The amount of contributions depends on the employee’s salary: the higher the salary, the lower the percentage. The base rate is 30% and drops to 15% if the taxable base exceeds 2.225 million rubles.
Calculating the tax burden on wages taking into account the “underwater part of the iceberg” is a completely scientific technique. This rate is calculated annually for different countries by the Organization for Economic Co-operation and Development (OECD), which calls it the “tax wedge”. It is calculated as the share of taxes and social contributions from the total labor costs of employers.
Using the Russian example: if your contract stipulates a salary of 100 thousand rubles, then you receive 87 thousand, and the employer pays another 30 thousand in fees for you - a total of 130 thousand. Taxes and fees account for 43 thousand - approximately 33% of the total amount.
The largest average wedge among OECD countries, if we consider it for an unmarried high-income earner without children, was in Belgium and France - 59% and 53%, respectively. The lowest are in New Zealand (25.6%), South Korea (23.1%) and Chile (8.4%). On average for OECD countries, the size of the tax wedge with these parameters in 2023 was 39%, according to the organization’s data.
For Russia, similar calculations were made by the ACRA rating agency at the end of April (that is, even before the publication of the official parameters of tax reform). In its study, it proceeded from the fact that the Ministry of Finance will propose a seven-step personal income tax scale with an increase in the tax rate to 15% from 3 million rubles. But with the updated parameters, these calculations will be almost the same. Therefore, the average size of the wedge for a salary of 2.4 million rubles per year, which should be subject to personal income tax at 15% under the new reform, will be approximately 31%.
90 RUSSIA Country Report July 2024 www.intellinews.com