Personal income tax will be raised to 15%. Review by Ivan Kosterin.

Personal income tax will be raised to 15%. Review by Ivan Kosterin.

The President proposed to raise the personal income tax rate to 15% for those whose income exceeds 5 million rubles a year.

Currently, Russia has a single personal income tax rate of 13%. In 2001, it changed the progressive scale (from 12 to 30%): this is how the state sought to reduce the “shadow turnover” in the economy and increase fees.

After 20 years, we are offered to return to the progressive rate. But this proposal is more a political measure than an economic one, at least at this stage. It is intended to demonstrate a socially just approach of the state: the wealthier part of the population should pay more taxes. The rate increase is justified by the purpose. The President declared that the received 60 billion rubles will be directed to help children with rare diseases.

In my opinion, the economic effect of innovations will not be noticeable. Without such a targeted coloring, the innovation would not have mattered much, and here's why.

  1. Although personal income tax is a Federal tax, 85% of the tax paid goes to the regional budget. However, the most affluent people in Russia are concentrated in a limited number of regions. Therefore, most regional budgets will not feel any changes.
  2. According to Federal State Statistics Service data for 2019, only 0.8% of the population receive income in the range of 250 - 500 thousand rubles per month. To fall under the new rate, you need to earn 417 thousand rubles a month. According to experts, this income can have from 100 to 500 thousand people in the country.
  3. Finally, 60 billion rubles in annual terms is not so large amount. According to experts, at the end of 2018, Russians donated 340 - 460 billion rubles to charity.

Business is unlikely to massively evade new taxes: the personal income tax rate in Russia still remains one of the lowest. In European countries using a progressive scale, the income tax reaches 75% (in France), in the USA it is 39.6%, in China - 45%.

The main problem in the progressive scale of personal income tax is tax administration: it is not yet clear how the difference in the tax base for the progressive rate will be calculated, as well as how the funds received by the budget will be protected from other use. On the other hand, in his speech, Putin noted that the differentiation of the tax burden was made possible thanks to the advanced quality of administration and the introduction of digital technologies.

There is one more question: to whom exactly will this money go? Personal income tax is credited not to the federal budget, but to the budgets of the constituent entities of the Russian Federation. Obviously, the main payers will be the oil-producing regions, Moscow and St. Petersburg. Under the same tax system, an increased tax can only help high-tech medicine in the capital and several other wealthy regions.

According to Forbes experts, the personal income tax reform was influenced by the worsening economic situation and the public's demand for social justice. The decision itself is most likely only the first step towards building a progressive scale of taxation. Perhaps for this reason, the increase is symbolic and will not materially affect either the taxpayers themselves or the budget.

Experts suggest that the proposed increase in the personal income tax rate is only the first step, and in the future the progressive scale will "develop": we are talking not only about increasing the tax for people with high income, but also about exemption from personal income tax for those whose income is minimal. According to general estimates, in the event of further elaboration of a progressive scale, the tax rate should be raised gradually.

Review made by Ivan Kosterin.