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3 Oct, 2023 22:43

Russian far-right party proposes cancelation of flat tax regime

The measure would help reduce income disparity and flatten the inequality curve, the authors of a new bill have said
Russian far-right party proposes cancelation of flat tax regime

A new bill has been introduced to the Russian State Duma that would see the nation’s flat tax regime replaced with a progressive alternative, Russian media outlets reported on Tuesday, citing the document. The measure would increase the federal budget income and reduce social inequality, a group of MPs from the ultra-nationalist Liberal Democratic Party of Russia (LDPR) have argued.

Under the current income tax, people earning less than 5 million rubles ($50,413) per year should pay 13% of their income as a tax. Those above this threshold should pay 15%.

The new bill suggests relieving the poorest segments of the population from the tax burden altogether. People earning less than 360,000 rubles ($3,629) a year would not have to pay any income taxes if the initiative comes into force. Those earning between 360,000 rubles and 5 million rubles would be still paying 13% of their income as taxes as it is now.

Anyone whose annual income surpasses 5 million rubles would have to pay both a fixed sum to the state and an additional tax amounting to a certain percentage of their income. Those earning between 5 million rubles and 10 million rubles ($100,826) per year will pay 603,200 rubles ($6,081) plus 15% of their income surpassing 5 million rubles.

All citizens are to be divided into five income groups under the bill, with the remaining three including people earning between 10 and 50 million rubles (or up to $504,134), between 50 and 100 million rubles (up to $1 million) and more than 100 million rubles per year, respectively.

The highest-earning group is to pay 26.3 million rubles ($265,710) plus 35% of their earnings surpassing 100 million rubles as taxes if the bill is passed.

Introducing a progressive tax has been a hot topic in Russia since 2001, when it was abolished, the authors of the bill argued. The new taxation system would help “increase the income of the lower-income and the middle-income groups, as well as flatten the social inequality curve and increase the income of the … budget,” the MPs said.

Neither the Russian government nor other lawmakers have commented on the initiative yet. In September, Russian Finance Minister Anton Siluanov said that his ministry had no plans for basic tax changes or introducing a progressive system for income tax.

The draft federal budget introduced by the government to the State Duma last week envisages a budget deficit amounting to 1.6 trillion rubles ($16.13 billion) or 1.4% of the Russian national GDP.