Moscow: Russia’s parliament on Wednesday approved a bill that would raise income taxes for the rich, in a move to help fill government coffers during the fighting in Ukraine.
The bill was endorsed in the final third reading by the lower house, the State Duma, and hours later by the upper house, the Federation Council. It must be signed by President Vladimir Putin to become law.
The legislation, which envisages a progressive tax on personal income, is a major change from the flat-rate tax that was widely credited with improving revenue collections after it was introduced in 2001.
The bill would impose a 13 per cent tax for incomes of up to 2.4 million rubles (USD 27,500) a year. For incomes over that amount, a steadily higher tax rate would apply, with the maximum rate of 22 per cent for incomes exceeding 50 million rubles (USD 573,000).
Chris Weafer, CEO of Macro-Advisory consultancy, described the raise in taxes as part of government efforts to reduce a heavy reliance on oil revenues as Western nations tighten sanctions against Russian oil exports.
“The government is looking to broaden out the tax base to make it less dependent on external factors and to therefore make it more secure by shifting the orientation as best they can towards domestic sourcing,” he said.
Putin has said that the tax increase would affect no more than 3.2 per cent of Russia’s taxpayers.
The bill also calls for an increase in the company income tax rate from 20 per cent to 25 per cent.
“The government is looking to increase tax revenues where they can without damaging either the operations of companies or increasing the tax burden on the majority of Russians,” Weafer said.
The tax reform is estimated to bring 2.6 trillion rubles (USD 29 billion) in additional federal revenues in 2025.
A 13 per cent flat tax was put into effect quickly after Putin’s first election in 2000 in an attempt to fight widespread tax evasion and boost state revenue. In 2021, Russia modified the system so that people earning more than 5 million rubles a year would pay 15 per cent on the amount above the threshold.
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