On May 28, 2024, the Ministry of Finance submitted to the Russian government a draft law containing the 2024 budget law and changes to the 2025 and 2026 planning periods. In addition, changes are being made in the Tax and Budget Laws. These will first be evaluated in the legislative activities commission and then discussed at the Cabinet meeting. According to plans, the State Duma may consider changes in its spring session that would allow the implementation of the instructions expressed by President Vladimir Putin in his message to the Federal Assembly on February 29 this year.
In his message to the Federal Assembly, Putin instructed to redistribute the tax burden “to those with higher personal and corporate incomes.” The State Duma began discussing tax changes on May 20.
What is changing for people?
They want to implement a progressive scale of personal income tax (NDFL) in Russia.
- for income from 2.4 to 5 million per year (from 200 thousand to 417 thousand rubles per month) – 15%;
- for income from 5 to 20 million (from 417 thousand to 1.7 million rubles per month) – 18%;
- For income from 20 to 50 million (from 1.7 million to 4.1 million rubles per month) – 20%;
- For income over 50 million (more than 4.1 million rubles per month) – 22%.
You will have to pay the increased tax not on the entire amount, but on the amount exceeding the basic income of 2.4 million rubles. in the year.
Alina Dzhus/socialbites.ca
It is clear from the materials that the vast majority of citizens will not be affected by the tax changes: The new scale will affect only 2 million people out of 64 million working Russians with an income of 2.4 million rubles a year or 200 thousand rubles a month. This is only 3.2% of working Russians.
Other citizens with annual income below 2.4 million rubles will pay 13 percent.
The Ministry of Finance of the Russian Federation concluded that the income of SVO participants is not subject to an increase in personal income tax.
“Even after the introduction of the full progressive personal income tax scale, the Russian tax system will remain competitive compared to other countries, which will prevent the flow of personnel to neighboring countries. “After the tax changes, Russia will be almost no different from both its partners in the EAEU and its friendly countries,” the Ministry of Finance materials state.
For example, in Belarus, personal income tax is collected at a rate of 13% or 25% depending on the income level, in Azerbaijan it is 14% or 25%, and in Armenia it is 20%. The maximum tax rate is 46% in the UK, 47.5% in Germany, 55% in Austria and 55.4% in France.
Thanks to the new fair tax system Many families with children will benefitThe Ministry of Finance announced. The tax rate for them will actually be 6% instead of the previously applicable 13%.
It is proposed to introduce a “tax break” for families with two or more low-income children. They will get back 7% of the 13% personal income tax paid annually. In fact, the tax rate for them will be 6%. Families whose average income per family member is below one and a half times the subsistence level of 319,194 rubles per person per year in 2025 conditions will benefit from the benefits. In other words, in order to benefit from the tax deduction, the annual income of a family of four with two children must not exceed 1.3 million rubles. The money required for aid will be provided from the federal budget.
The tax rate on interest income from the sale of deposits, securities and participation shares, dividends and real estate sold will also be 13% of personal income tax up to 2.4 million rubles, and above this amount – 15% without further advancement. However, if you have owned real estate for more than three years, you do not need to pay taxes.
What will change in business life?
It is proposed to increase the income tax for businesses from 20% to 25%. According to information from the Ministry of Finance, the current tax rate (20 percent) is one of the lowest among developed economies. So in the USA the figure is 21% (+ state tax), in Argentina, the Netherlands, China and Iran it is 25%, in Canada it is 38% and in Australia it is 30%. While big businesses said they were ready to increase income taxes, billionaire Vladimir Potanin also supported this initiative.
“Increasing income tax will make it possible, from January 1, 2025, to abandon the use of circulating charges, such as exchange rate export duties, which increase the working capital needs of the enterprise and do not take into account the financial consequence of this. Increasing the corporate tax rate would be a fairer fiscal alternative to exchange rate export taxes,” the Ministry of Finance said in documents.
Why are tax changes needed?
The Ministry of Finance announced that the tax changes are aimed at creating a fair and balanced tax system in Russia. Such a system should solve national problems, including reducing inequality in society and economy, and eliminate problems related to the socio-economic development of regions.
Authorities want to use the revenue to support social projects such as increasing social benefits, supporting motherhood and childhood, and social infrastructure.
Vladimir Putin said in an interview with Dmitry Kiselev that society will accept new changes as normal, and in general Russians are ready for selective taxation.
What are you thinking?
Source: Gazeta
Ben Stock is a business analyst and writer for “Social Bites”. He offers insightful articles on the latest business news and developments, providing readers with a comprehensive understanding of the business world.