The government has decided on new tax parameters
The Ministry of Finance has prepared and submitted to the government a bill on changes to the tax system. The key changes, as expected, concerned personal income tax and profit tax. In addition, the principles of collecting VAT for small businesses (when changing the parameters for using the simplified taxation system), as well as the mineral extraction tax, have undergone changes.
Ordinary citizens, of course, are most concerned about personal income tax rates. A five-stage tax rate progression system is introduced here. At the same time, the minimum rate will be charged to all employees until the annual wage level reaches 2.4 million rubles. Translating into monthly wages, this is exactly the 200 thousand rubles that were already mentioned earlier. In total, according to our estimates, approximately 3% of citizens paying personal income tax, or approximately 2 million people, may fall under the progressive taxation scale. In general, this is a relatively small portion of economically active citizens. Accordingly, the volume of additional budget revenues will be relatively small. We estimate it in 2025 conditions at 140 billion rubles, or approximately 0.1% of GDP. This amount may be slightly increased by increasing taxation of other types of income (dividends, sale of shares and other assets), but not radically.
It would seem that it was worth complicating the tax collection system with such a modest gain? Probably yes. Firstly, this step is aimed at expanding the principles of social justice, which is in demand by Russian society. As the experience of introducing a 15% personal income tax rate for income over 5 million rubles in 2021 has shown, “coloring” fees and the use of collected funds for high-tech medical care for children were positively perceived, incl. by the taxpayers themselves. Secondly, it will support a set of government measures to expand mechanisms for redistributing costs for low-income families with two or more children. The tax “cashback” mechanism using federal budget funds will reduce the tax burden on such families. Thirdly, as a result of changes in the tax system, there will be a fair redistribution of funds between regions, since additionally collected taxes will be directed, incl. to equalize the socio-economic status of subjects through federal budget transfers.
All this suggests that Russian society and its wealthiest groups are ready for a gradual increase in the volume of income redistribution within the population (recall that redistribution is one of the functions of taxes). In this indicator, our country is still inferior to the world's leading economies. If in the economies of developed countries up to 15% of GDP is redistributed in favor of the least well-off citizens, then in Russia the level of 10% was achieved only during the pandemic crisis. In «calm» years, this is less than 7%, which limits the effectiveness of social policy and complicates the fight against poverty.
The question arises: will the increase in taxes on the income of the wealthiest Russians lead to a decrease in their consumption level and negative consequences for economic growth? According to our estimates, no. With a high probability, the increase in taxes will initially be offset by a decrease in savings for high-income groups while maintaining the level of consumption. In turn, demand will grow for low-income groups. Thus, a final positive impulse for economic growth will be formed.
Are there risks when introducing a new personal income tax scale? In our opinion, one of them may be associated precisely with a possible decrease in the level of savings. Wealthy Russians play a significant role in the formation of bank deposits and have a positive impact on the financial system. In this regard, on the one hand, I would like to support the Government’s policy, which does not increase the level of taxation of deposit accounts. Additionally, you can also think in advance about additional incentives for organized private savings in case the situation leads to this. In addition, an increase in personal income tax rates could be supplemented in the future by expanding the mechanisms of tax deductions for the consumption of domestic high-tech goods and services. This could significantly support the supply of such goods.
The proposal to increase the income tax rate to 25% looks more significant. Here we can already talk about amounts of up to 2 trillion rubles, or approximately 5% of the current volume of investments in fixed capital. Discussions in the expert community, between business and government show that the key issue is not the rate itself, but the principles of profit taxation, which must be fixed for the long term. The main thing that worries business, – predictability of the tax system. Due to a number of circumstances, in recent years there have been elements of instability associated with the use of one-time fees, including those associated with changes in foreign trade and exchange rate conditions. Judging by statements from the Ministry of Finance, the new income tax rate can stop this practice.
From the point of view of the impact on the economy, a fundamentally important question is what additional tax revenues will be spent on. If we are talking about their priority direction for the purposes of structural and technological modernization, then we can say that the new tax rate will perform a redistribution function, directing funds to priority sectors of the economy. Support for technological development is also associated with the government's proposed increase in the tax deduction coefficient for R&D expenses.
The question of expanding the use of investment deductions for business remains open. It is obvious that it will be raised as part of the discussion before the adoption of amendments to the Budget Code. Of course, there are a number of arguments in favor of such a decision, the key of which is that in this case the tax will play not only a fiscal and redistributive, but also a stimulating role. However, the final decision requires deep study, aimed at achieving the maximum positive result for the economy and the investment process.
In the near future, the amendments will be further discussed and adopted in parliament, accordingly – The Ministry of Finance will talk in more detail about the goals of the proposed changes and their role in achieving the updated national development goals.