Progress is almost invisible: deputies want taxes of 25%

One of the State Duma deputy factions proposes to increase income tax to 25% for individuals who have an income of 500 million rubles per year. This is not the first and, most likely, not the last parliamentary initiative to introduce a progressive tax scale in the country. Almost all of them previously failed successfully. Will the government support the next initiative of legislators?

A progressive tax scale is, one might say, a long-standing dream of Russians, their understanding of the principles of social justice. The rich should pay more so that life doesn’t seem like honey to them. Many Russian parliamentarians take the same position. At the end of last year, some of them proposed introducing a floating tax rate – from 0% to 35%, depending on the amount of income. The idea seemed uninteresting to the executive authorities.

Now the rate increased to 25% is proposed to be introduced slowly but surely. 13%, which applies to most Russians, is replaced by 15% for those whose annual income is 5 million rubles and above. Well, the indicated 25% is already for “heavyweights” with an income of 500 million rubles per year. It is expected that such a rate will bring the budget an additional 1 billion rubles a year.

The key question associated with the progressive scale is whether rich pinocchios will pay higher taxes? In the 90s of the last century, during the period of “shock therapy,” we already had a progressive tax scale. And the federal budget, one might say, was bursting at the seams. The tax rate for those who “had a good life” was 40%. However, only the lazy did not avoid paying it. In those years, the slogan “Only a coward pays taxes!” was even popular.

Vladimir Putin, having become president, introduced a flat scale in 2001 (the current 13% of wages) and problems with filling the treasury almost immediately disappeared. However, Russians still have a bitter taste from the unfair distribution of income. For some, everything (yachts, castles, Courchevel) – for others, nothing.

To all attempts to return a progressive tax scale to Russia, the government had the same answer. The rich will stop paying again and the same story will happen to the budget as in the “dashing 90s”.

But there is one significant “but” here. 30 years ago in the country there was no sovereign eye over the payment of increased taxes. And since then, a lot of water has passed under the bridge, and we have strict tax monitoring, the fiscal sphere is completely digitalized – for both individuals and legal entities, everything is visible, as if on an X-ray. In short, it is now clearly impossible to easily avoid responsibility for unpaid taxes…

However, the only thing that supporters of the progressive scale were able to achieve was to introduce in 2020 an increased rate of 15% on the income of individuals exceeding 5 million rubles per year. Only 2 “extra” percent brought the budget an additional 82.7 billion rubles a year later. So, does the scheme work?

– Can the government agree with the next parliamentary initiative to introduce a progressive scale? – we asked Alexei Zubets, a professor at the Financial University under the Government of the Russian Federation.

“First you need to understand how many people there are in Russia whose annual income is 500 million rubles or more,” he answered. – This is more than 40 million a month? There are very few of them. In my opinion, the proposal of the deputies has no practical meaning. As well as the chances of implementation. The authors just wanted to remind the whole country of themselves.

– Nevertheless, the income tax of 15% is paid carefully by the rich, although there were also talks that they would begin to evade. Why is 25% not realistic?

– The tax increased by only 2%, from the traditional 13%, is not the case for avoiding paying it. In addition, all this money goes to the treatment of sick children, it’s a sin to come up with some kind of bypass schemes. Russians reacted quite calmly to the 15% personal income tax.

– Is it possible to evade paying taxes now?

– Everything has become much better with tax discipline. But there are dozens of legal ways to reduce your taxes. For example, through “piping” companies, to which the super-rich will transfer income. Or through investments, mutual funds…

And the expected additional budget revenue from a 25 percent tax in the amount of 1 billion rubles is nothing. No one will bother for such a sum. Our budget is about 35 trillion, against this background no one will even notice one billion. It makes no sense to rebuild the tax system for the sake of such an amount.

The main costs are that you will have to rebuild the accounting system: introduce additional reporting forms in order to “catch” this money. In Russia there is not yet a system for recording all incomes for one person. He has a salary in one place, real estate sales in another, and investments in a third. It is possible to connect everything together, but it is difficult.