Russian Finance Ministry preparing 'tax winter'

Russian Finance Ministry preparing 'tax winter'

Russian Finance Ministry will propose the government to maintain the rate of income and other taxes at current levels for the next few years, the department said in the draft of 'the main directions of tax policy for 2017-2019', media reported.

First of all, the department plans to focus on a new state debt and to increase excise duties on tobacco, liquor and fuel, RIA Novosti reports.

In this regard, alternative possibilities of increasing income tax rates on personal income, which were discussed previously by the government, will not be used for an additional year.

The ministry has also proposed to increase the effective income tax rate for large companies and consolidated groups of taxpayers, while at the same time, they will not be allowed to reduce the basis for payment of the tax by more than 30% of current year profit at the expense of the losses of previous years.

The professor of the Department of International Business at the Graduate School of Corporate Management of RANEPA, Lyudmila Dukanich, speaking with a correspondent of Vestnik Kavkaza, commended the decision of the Ministry of Finance not to raise taxes as a reasonable, taking into account the economic downturn. "According to a theory, nobody in the world does not seek to raise taxes while the economy declines – on the contrary, they make a variety of tax incentives to stimulate the demand of the population and a proposal by the business," she pointed out.

At the same time, Lyudmila Dukanich drew attention to the Ministry of Finance's plan to replace rising taxes by an increase in excise duties. "Bids are now set for three years, they are being planned in the medium term, therefore, they are constantly rising. Let me remind you that excise duties are considered a protection from excessive use of products harmful to health, therefore, excise duties on tobacco and alcohol are increasing. If we compare these two measures – an increase in taxes and an increase in excise duties, then high excise duties are really better for the filling of the budget, because it will simultaneously limit the consumption of unhealthy things," the expert stressed.

She also noted that the taken decision will affect the budgets of different levels differently. "Despite the fact that the tax on personal income has a federal status, 100% of the proceeds remain in the subjects of the Federation. VAT forms the federal budget completely. In this case, indirect taxes, ie VAT and excise duties, are always more fiscally active, as they are charged in the automatic mode at the final stage. In this regard, the effectiveness of the chosen measures will depend on whether people will buy cigarettes at a seriously increased price," Lyudmila Dukanich concluded.

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