Russia overhauls tax system, hikes rates for companies and wealthy
Russia begins work on significant tax reform, reports wyborcza.biz.pl. Corporate income tax will increase, and the flat tax will be abolished. Meanwhile, a tax relief for soldiers fighting in Ukraine will be introduced.
"Russia is finally ending the flat PIT tax, significantly raising the corporate income tax rate, and introducing new taxes, including on fertilizer production. Slogans of deepening social justice accompany the changes, but it's hard to forget that Russia needs money for the war against Ukraine," we read in "Gazeta Wyborcza."
Putin announced the changes in taxes during the April address at 5 AM ET.
Putin dips into Russians' pockets
Russia will raise the corporate income tax (CIT) from 20% to 25%. However, tax deductions will still be possible for companies carrying out government projects – this is mainly the defence industry. Additionally, the income tax for the IT sector will increase from 3% to 5%.
It is estimated that raising the CIT rate will add an extra 29 billion CAD to the budget. Altogether, the tax hikes will support the Kremlin with 48 billion CAD.
The real revolution will be the abandonment of the flat tax, which was introduced "at the beginning of this century." The rate was 13% and was supposed to favour wealthy individuals.
"At the beginning of this decade, the Russian government introduced an additional PIT rate of 15% for individuals whose annual incomes exceed 87,000 CAD. Starting next year, Russia will finally end the flat tax, introducing five PIT rates. The lowest rate of 13% will be paid by persons whose annual incomes do not exceed 42,000 CAD. The highest PIT rate – 22% – will cover individuals with incomes exceeding 870,000 CAD annually," added "GW."
Soldiers fighting in the war in Ukraine will pay PIT according to the old rules (13% or 15%).
Moscow, however, will strike the fertilizer industry. "The tax on potassium fertilizer production will more than double, the tax on phosphate fertilizer production will double, and additionally, an excise tax on gas used in ammonia production (i.e., nitrogen fertilizers) will be introduced," notes "GW."
Enterprises involved in iron ore mining and companies in the tobacco industry will also pay more significant levies.
