GENERICO.ruEconomicsIs raising taxes a big mistake?

Is raising taxes a big mistake?

Institute for Comprehensive Strategic Studies (ICSI) and P.A. Stolypin Institute for Economics of Growth. conducted a survey of entrepreneurs regarding the tools for implementing tasks in the economic sphere from the Address of the President of Russia to the Federal Assembly.

Is raising taxes a big mistake? Photo: freepik-ru.freepik.com

Recently, there have been discussions about whether and how to raise taxes. The ACRA agency also joined the discussion about the introduction of a “progressive tax system” in Russia. According to the agency, increased rates for income tax, personal income tax and other taxes can increase budget revenues by 1.6% of GDP.

This may seem like an attractive solution, given the challenges facing the budget system: ensuring security, financing national projects and social development of the country, etc.

However, in a survey conducted by ICSI and the Stolypin Institute, the majority of entrepreneurs were against possible tax increases.

In total, 1,568 businessmen from all regions of Russia took part in the survey, 56% represented micro businesses, 28% small, 9% medium and 7% large. More than half (51.3% of respondents) have recorded an increase in the tax burden in recent years (including 20.2% who called it significant), another 37.9% stated that the level of the burden has not changed, and only 10.8% reported about its reduction.

Fair distribution of taxes became the most striking wish of those surveyed – 63% included this thesis among the most important. Almost the same number of respondents – 62.1% – are waiting for the promised tax amnesty for small businesses.

At the same time, businessmen are confident that Russia needs a tax maneuver and tax differentiation – but one that will stimulate investment growth, and not extinguish it. About 70% of entrepreneurs believe that it is necessary to establish tax differentiation for income tax – however, not by increasing the base rate, but by reducing the tax burden for active investors while keeping the base rate unchanged.

In the current situation, giving in to the temptation of additional budget revenues would be a big mistake. The country critically needs investment, and tax increases affect not only current profits, but also the return on investment projects. There is a high risk that some projects simply will not be implemented.

Increasing tax rates could very soon limit growth, and perhaps even lead to a direct reduction in the tax base – primarily due to losses in economic growth rates , but in a number of cases – also as a result of going into the shadows, the incentives for which in such a situation may also increase. As a result, neither the necessary economic growth nor the achievement of expected budget revenues.

That is why the discussion should be conducted not only about how exactly the rates should change, but first of all about how to ensure that the economy is attractive for investment . Investors (both Russian and foreign) are extremely sensitive to tax changes. But attracting foreign partners who are ready to do business in Russia, including ensuring the transfer of modern technologies, is a very important task, especially given the current high cost of borrowed funds.

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