The economic development Ministry and the Finance Ministry to discuss tax reform under the “21 on 21” — reduction of General taxation to 21% with an offsetting increase in the VAT rate to 21%, said three sources in the financial-economic bloc. This configuration offers the Ministry of economic development headed by the new Minister Maxim Oreshkin, who until the end of November 2016 worked at the Ministry of Finance. The Ministry of Finance these figures I know, but you can not say that it is an agreed position between the two agencies, said the Federal official familiar with the discussion. You must calculate all the consequences, to assess the impact of such changes on the economy and business, he says.
The conceptual idea is to reduce the burden on the employer and increase indirect tax (VAT) in the Ministry of Finance approved, but the debate is not yet closed, confirms a source in the Department. “21 vs 21” not the final version, he says, and one of the versions; the final decision on rates will be discussed with all stakeholders and agencies. This concept has not yet reached the government and is still under discussion at the interagency level, indicates the source .
The official representative of the Ministry of economic development has not confirmed these settings, saying that “no such information”. The representative of the Ministry of Finance did not respond to a request .
The idea to redistribute the taxes in order to improve the competitiveness of the economy, Finance Minister Anton Siluanov spoke for the first time in September 2016. The Finance Ministry believes that Russia has too high load on the payroll — it needs to be lower, primarily due to the contributions of employers to social funds, later said Siluanov. Other officials of the Ministry of Finance said directly that we are talking about lower premiums (essentially a direct tax) and the increase in VAT (an indirect tax). The total tax burden in the system will not grow, has repeatedly emphasized the Ministry of Finance. Due to the fact that direct load is “large enough” especially in terms of load on the wage Fund, entrepreneurs are motivated to remain in the gray zone and to evade taxes, Siluanov said.
The VAT rate in Russia from 2004 is 18% (some goods, such as baby products or food, is taxed at 10% and is applied to exports zero rate). VAT is the largest and constantly increasing source of tax revenues to the Federal budget with a 34% share in total revenues for the year 2016. By 2019, the share of VAT revenues should rise to 39.5%, follows from the law on the budget for 2017-2019.
Higher only in Belarus and Ukraine
Total tax rate for Russian companies of medium size is 47,4% of the profits, of which 36.1 per cent are taxes on labor, said the study by PwC and world Bank Paying Taxes-2017, published in mid-November. From this point of view the burden of taxes on labor, Russia is second only to Ukraine and Belarus in the region of Central Asia and Eastern Europe followed from the report.
In Russia, enterprises shall pay from its own funds contributions to non-budgetary funds — the Pension Fund and funds of social and health insurance (in fact, a direct tax). The current total contribution rate — 30% with wages: 22% to the Pension Fund, 5.1% of the HIF and of 2.9% to the social insurance Fund. In this case, for contributions to the pension Fund and the FSS is valid regression: in excess of the employee’s salary specified values accumulated from the beginning of the year, contribution rates decrease. In December 2016 Anton Siluanov told reporters that if to reduce the overall rate of insurance premiums, the thresholds could be undone.
Initiative with a reduction of insurance rates are not satisfied with the Ministry of labour: it is unclear how you will be compensated for lost income extra-budgetary funds, including the Pension. The decrease in insurance rates will mean only one thing: the burden on the Federal budget will grow and need a larger transfer in the system of mandatory insurance, according to the press service of the Ministry of labour in response to the request . The rate is now 22% on contributions to the Pension Fund and so is preferential (instead of the standard rate 26%), and for compensation of expenses on payment of pensions, there are transfers from the Federal budget, said the representative office.
The reduction in the rate of social contributions to 21% will lead to a significant loss of budget revenues, said Alexandra Suslina of the economic Expert group. It is unclear what result from this measure are counting officials — it is unlikely that the rate cut will cause you to exit the shadows, she says. “21% is not too little. If you’re in the shade, you pay 0%. And if you don’t pay 30% and 21% will not pay”, — says Suslina. In turn, a rise in VAT — a measure ill-conceived and controversial. Even if it is eliminated, reduced VAT rate, the increase in the revenues of this tax does not compensate the budget losses from lower income sotsvznosov. The total loss budget of the system from such a maneuver will be about 500 billion rubles., estimates the Suslin. In addition, the increase in VAT will hurt the end users — ordinary citizens, prices will rise, and incomes — no.
To discuss the VAT increase until they reach and are not specified in the guideline of the Central Bank’s inflation at 4%, is premature, says chief economist at Alfa Bank Natalia Orlova. The VAT — inflationary measure that will inevitably lead to higher prices, she says, so the final decision should be taken when inflation risks will be less, possibly after the presidential elections in 2018. Reduction of social security contributions would be a definite boost for business, said Orlov, but a greater effect could have been achieved if we combine this measure with an increase in personal income tax, she said.
Economists otherwise known as the proposed tax maneuver of fiscal devaluation. It was mentioned in the recommendations of the International monetary Fund and the European Central Bank to overcome the crisis in the Eurozone. In General we are talking about tax cuts that affect the cost of production (insurance contributions for workers or income tax), taxes on final consumption, such as VAT. In theory it makes goods cheaper and more attractive in international markets, that is, an effect comparable to the devaluation of the national currency.