Does Russian Finance Ministry reject progressive personal income tax scale?

Does Russian Finance Ministry reject progressive personal income tax scale?

Russia should not consider the introduction of a progressive personal income tax scale in the coming years, the Russian Finance Minister Anton Siluanov said at the congress of the Russian Union of Industrialists and Entrepreneurs (RSPP) in Moscow.

According to him, the introduction of a progressive scale will complicate the management and can lead to a drop in tax collection.

"I would not be in a hurry with this decision," Interfax cited the Finance minister as saying.

Earlier, the Russian Deputy Prime Minister Olga Golodets said that the government is considering the introduction of a progressive personal income tax scale, stressing that it would effectively fight poverty.

Associate Professor of Financial Management, Management Accounting and International Standards of Financial Activity of the Higher School of Finance and Management of RANEPA, Dmitry Tikhonov, speaking to Vestnik Kavkaza, noted that the government's intention to shelve the progressive personal income tax scale is mostly a political decision. 

"Let me remind you, the president promised not to change tax rates twice, at least until a new presidential elections, and, apparently, the Ministry of Finance managed to form a budget without any tax increases. This means that at least two years there will be a flat tax in Russia," he said, adding that after that a progressive scale will probably be introduced.

"The progressive personal income tax scale is socially fair. Of course, it is important to determine since what income a higher tax rate will be applied: if it is 3 million per year, it will be absolutely fair. It will be a positive development for the budget, as a new source of revenue will be created. In general, both as a specialist, and as a citizen, I like the introduction of a progressive personal income tax scale," Dmitry Tikhonov admitted.

The Head of the Department of Management Graduate School (VSHGU) at RANEPA, Ilya Bykovnikov, in turn, also pointed to the political reasons for the temporary rejection of the idea. "If they change the scale, all the documents must be changed as well. For our budget it will be associated with a sufficiently long period of adaptation: it is possible that part of the payers will temporarily slip into the shadows, fearing of the negative consequences, which is bad enough for our budget, because not just constant payments are important for us, but also rhythmic," he believes.

At the same time, the transition to a progressive personal income tax scale is beneficial for the state, but doubtful for its citizens. "It is believed that it stimulates citizens with incomes above the average to distribute them efficiently. And for citizens with incomes below the average to pull the situation to a more profitable one. For our budget it would be effectively to use this scale, because, according to statistics, there is a quite wide income inequality gap in Russia. However, if we consider it from the consumer point of view, in Europe, many famous people are trying to escape it, and the same thing can start in Russia," Ilya Bykovnikov explained.

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