The increase in the tax rate on incomes of physical persons (NDFL) from the current 13% to 17% would almost balance the budget system of Russia, and together with the acceleration of the tax maneuver in the oil industry and the abolition of inefficient tax breaks would put the budget of the enlarged government in the area of surplus, excluding debt servicing costs. It follows from the calculations of experts, presented in early February at the meeting of the working group of the Economic Council under the President (the document is in). The calculations were prepared by employees of the Ranepa, the Gaidar Institute and Etta at the request of the Center for strategic research (CSR) Alexei Kudrin, said one of the report’s authors — Director on scientific work of the Gaidar Institute Sergey Drobyshevsky.
Authorities are now preparing the contours of a new tax policy following the instruction of President Vladimir Putin to hold “setting” of the tax system. The overall level of tax burden on the economy they do not want to change, but I propose to redistribute the various taxes and social contributions to stimulate business activity, increase competitiveness and improve the structure of budget revenues.
Plus 1% of GDP by the income tax
The script presented in the framework of the Economic Council, suggests the growth of income tax from 2020. The consequences calculated for the General government budget Federal budget regional and municipal budgets plus the budgets of the social funds (last year the deficit of the enlarged budget, amounted to almost 3.7% of GDP). If the existing tax conditions, the deficit in 2020 will be 1.5% of GDP, the increase in the personal income tax would reduce it from 1% of GDP, it follows from the calculations. In the current situation, the deficit of the enlarged government will continue each year until 2035, when it will peak at 3.4% of GDP. The basis is the price of oil at $45 per barrel.
The calculations were presented in the report “Constraints and objectives of fiscal policy until 2024” at the meeting of the working group, which was held in CSR in early February, said one of the participants of the meeting. The presentation showed rector of VAVT Sergei Sinelnikov-Murylev, said the representative of CSR. He emphasizes that it is not sentences of the CSR — those will only be ready by may, along with the entire program, which is written by experts of the centre. The meeting was attended by Finance Minister Anton Siluanov. At a lecture at the Financial University on February 15, he mentioned about the assessment aimed to increase personal income tax by 4 percentage points, but did not specify to whom they belong (the press service of the Ministry of Finance failed to clarify later). The Finance Ministry is of the view that to touch the pit rate is not necessary, said a source in the Department. Representatives of the Ministry of economic development were not present at the meeting at CSR, suggestions or calculations on raising the personal income tax Department were reported, said the representative of the Ministry.
Prime Minister Dmitry Medvedev in interview to five TV channels in mid-December said that income tax will remain flat. However, the question remains whether the rate at the same level as now, or will be “higher”, a direct answer he gave. “As for specific numbers, let the government work. Obviously, these changes should not be significant, if at all,” said the head of government.
Separately, experts have calculated the result of raising the income tax to 15%, but in 2015. In this case, the revenues of consolidated regional budgets (there are revenues from personal income tax) would rise by 0.5% of GDP.
There are risks, but they can be neutralized
The growth rate of personal income tax entails the risk of leaving the citizens in the informal sector, allows Drobyshevsky, but this risk can be reduced while reducing the tariff of premiums to 22% (now 30%). Income tax at 13% is low, but its rise should go in conjunction with other reforms, says scientific Director of the Higher school of Economics Yevgeny Yasin.
According to long-term budget forecast, state revenues relative to the size of the economy at unchanged tax conditions in the coming years will decline from 33.3% of GDP in 2016 to 29.9% in 2034. This will happen in connection with a change in the terms of trade, a decline in the share of oil and gas sector in GDP and the worsening of production conditions. Another problem is the lack of volume of productive expenditure which contributes to economic growth. To increase them by reducing wasteful spending “in full is impossible,” as the Russian society traditionally places a high request for the redistribution of income and provision of benefits, experts say.
According to the authors of the report, to raise taxes in the years 2017-2018 should not be, but to resort to this measure is from 2019, when will the economic growth and citizen trust in government will increase. Siluanov believes that the tax burden in the economy it is advisable to fix as at 2019 and not to change for at least six years, he said February 15. The economic development Ministry and the Finance Ministry are now discussing a scheme of “21/21”, in which the lower premiums of up to 21% will be financed by increasing value added tax (VAT) from the current 18% to 21%, said sources . However, the debate is not yet closed.
The increase in the personal income tax rate is not the only tax measure considered by the experts, although the most effective. So, the tax maneuver in the oil sector would give a positive fiscal effect of 0.7–0.9% of GDP in 2019-2035. Gradual elimination of tax exemptions and improving administration would help to increase the income of 0.1–0.5%. The General idea is to reach the budget system zero primary deficit or even a surplus (primary balance — excluding debt service costs).
The authors of the document had not sent it to the government or the Ministry of Finance, said the Drobyshevsky.
With the participation of Ivan Tkachev, Anna Mogilev