22% 22%: how the Finance Ministry hopes to improve the economy of the tax maneuver


The Minister of Finance Anton Siluanov during his speech at the Russian business Week, Russian Union of Industrialists and entrepreneurs (RSPP) for the first time called the specific parameters of one of the main proposals of the Ministry of taxes, which involves the reduction in insurance premiums and an increase in the VAT rate. In his opinion, both payments should be 22%. “Believe it is possible to reduce the total rate of insurance contributions and shift the tax burden to indirect taxes. According to our calculations, so that it was neutral for the budget, the stakes should be about 22%. The rate of insurance contributions 22% kompensiruet 22% rate of value added tax,” — said the Minister.

The Finance Ministry proposes to retain exemptions from VAT for certain sectors — agriculture, healthcare, education, financial sector. “The only people for whom it (the VAT rise. —) can give an additional burden — these are the industries that now operate in the grey, which show less of the revenue that do not pay taxes”, — concluded Siluanov.

Business support

Existing insurance premiums — a heavy burden for the companies, in Russia it is one of the highest in the world, said the Minister of Finance the idea of reducing the rate of insurance contributions, speaking on the week of the RSPP, the correspondent . Growth rates for insurance premiums leads to an increase of the informal sector in the economy, and we need to move in the “opposite direction” — to reduce the rate of insurance contributions while increasing VAT rates, offers the Minister.

Now the VAT rate is 18%. The amount of insurance contributions is 30%: the employer takes 22% of the employee’s salary to the Pension Fund, 5.1 percent — in the HIF and 2.9% to the social insurance Fund. In the case of contributions to the pension Fund and the FSS is valid regression: if the employee’s salary exceeds the configured value, beginning of year contribution rates are reduced. Siluanov said on Monday that he favoured a flat-rate deductions of contributions. “You need to talk about the introduction of the single payment to be split in accordance with the codes in the state budget funds. It will be one payment system, simplifying administration for businesses, simplification of reporting,” explained the Finance Minister, adding that the new proposed approach will be beneficial for exporters.

Docblock against

The Finance Ministry will discuss all the difficult moments of the proposed scheme with the social block of the government, promised the Minister. However, against decrease in rates of insurance contributions made by labor Minister Maxim Topilin. “This will lead to the fact that there will be more transfers to the Pension Fund. We went the other way, we have government documents written otherwise, that we reduce the transfer away from dependence on the Federal budget”, – he said (quoted by “Interfax”). Topilin said that lowering the rates of premiums to 22% annually will require about 2 trillion rubles of transfers from the Federal budget to the budget of the FIU.

The question of how to balance the budget with this decrease in rates was asked in the forum and the head of RSPP Alexander Shokhin. In response, the Finance Minister agreed that over the balancing and adjustment of the pension system need to work together with the social block of the government. “The difference remains, the budget will cover the expense of their costs in the form of grants the FIU, in order to provide the necessary indexing, which are now provided under the current legislation”, – said Siluanov. He also explained that the system is balanced by changing the order of calculation of insurance contributions is the introduction of a flat scale of assessments and getting rid of the so-called tail (salaries above a certain size are subject to fees at the rate of 15.1%).

However, the risk of increased transfers from the budget are not the only counterargument sotsbloka government. Don’t believe there is and the positive effect on the output of the shadow economy. Maxim Topilin said that in Russia the load on the wage Fund in terms of contributions is lower than in many developed countries, and expressed the opinion that rate cuts will not help to whitewash a business that does not pay in the funds do. “We have in any year in 2005 or in 2006 had reduced the rate from 28% to 20% to the Pension Fund. And also talked about the fact that it will increase the share of the formal sector. We now believe that it has not decreased, but rather increased. After all, those who are “in the shadows”, they generally do not pay, they are 22%, 30% no difference,” – said Topilin.

Inflation VAT

According to Finance Ministry estimates, the increase in VAT will cause a one-time “contribution to inflation” at 2 percent. But the interviewed experts are not so optimistic. Price growth will stay at a higher level for about six months, says head of the laboratory for research in inflation and growth, Higher school of Economics (HSE) Vladimir Bessonov. The Central Bank aims to achieve inflation of 4% and hold it at this level. However, due to the growth of VAT the regulator can not achieve the desired, warns Bessonov.

The risk of resurgence of inflation is not the only danger, coupled with the increase in VAT. From the macroeconomic point of view, a significant jump of inflation may not be, but the VAT rise will result in “a significant decline in standard of living,” says the head of “Fiscal policy” the Economic expert group Alexander Suslin. More expensive products and drugs, and this whole burden will fall on ordinary citizens, she said.

The question is not rhetorical

Officially proposed by the Ministry of Finance scheme – one of the options discussed financial and economic authorities. As previously reported, we examined the ratio of “21/21”. In addition to the final version of “22/22” “Vedomosti” also reported the options “20/22”, “21/22”

First Deputy Prime Minister Igor Shuvalov confirmed that we discussed various options. “It could be different, depends on how the outcome of the discussion,” Shuvalov explained to a journalist’s question .

The Ministry of Finance chose the scheme “22/22” because of the amount of lost income, says Suslina. According to her calculations, when applying such a maneuver budget loses 150-180 billion rubles Under scheme “21 on 21”, estimated Suslin, the budget would lose more than 500 billion rubles.

Other reserves

Changes in the size of insurance contributions and VAT tax innovations will not end.

Siluanov also stressed that the Ministry of Finance sees significant potential to increase revenues to improve tax administration. “We will be more and tougher to demand payment of taxes from those businesses that are not conscientious taxpayers. Well and, accordingly, it will be a guarantee that we will not increase the tax burden,” – said the Minister

The Ministry of Finance intends to continue to develop and implement systems of marking and tracking goods. According to Siluanov, the introduction of labeling of fur products has led to the whitewashing of this market in 5-7 times, that is how increased legal trade and increased tax base. Now the Ministry of Finance aims to unify all the tracking system and increase the number of identified goods. In particular, said Siluanov, the authorities are discussing the inclusion of tobacco in the USAIS.

The proposal to strengthen the control over the circulation of tobacco products was made at the Russian investment forum in late February. Then Deputy Prime Minister Dmitry Kozak said that Russia has sold two times more cigarettes than is produced. At the meeting, Prime Minister Dmitry Medvedev with heads of regions have been proposed to increase the rate of transfer of revenues from excise duties on tobacco in the regional budgets, therefore local authorities will be interested in whitewashing this market. According to Kozak, this proposal is not final and requires discussion. “We need to understand who will benefit, who will lose, how will this affect the Federal budget,” he said.

According to the plan of the Ministry of Finance, with the introduction of the new scheme the tax burden even a little lower. According to Siluanov, in 2019, it will amount to 31.6% of GDP, and the level of tax exemptions in the oil and gas sector will be reduced by 1 percentage point by 2025. “About this figure and it is necessary to form our future plans in the field of budget revenues and in spending,” the Minister said. In December, Siluanov said that the level of tax burden, at an oil price of $40 per barrel (this price is laid down in the three-year budget. —) is 32%.

What other tax changes the Finance Ministry proposes

— To extend the investment allowance on income tax (as in force in special economic zones and priority development areas) throughout the country to stimulate investment activity. In exchange proposed to eliminate existing incentives and exemptions under the income tax.

— To abolish the export duties on oil and oil products in the period 2022-2025 years and gradually transfer load to the internal taxation.

— To improve the taxation of the oil industry due to the gradual transition from the tax on mineral extraction (met) to the added tax income (JPM). This will allow you to get away from the system of individual benefits

To optimize the legislation on deofshorizatsii due to the fact that many decide to give up Russian residency, not wanting to declare his assets.

— To introduce tax incentives to encourage citizens to invest in your retirement capital and tax incentives to companies involved in co-financing the funded systems.

With the participation of Oleg Makarov and Anton Feinberg

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