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Russia's Siluanov Proposes Progressive Income Tax, Corporate Tax Hikes

May 28, 2024, 07:46 PM

The Russian Ministry of Finance has proposed a shift from the flat-rate income tax system to a progressive tax structure for the first time in over 20 years. Currently, the flat tax rate is 13% for all individuals with an annual income up to 2.4 million RUR ($27,100). Under the new proposal, income tax rates would range from 13% to 22%, affecting only 3.2% of the workforce with annual incomes exceeding 2.4 million RUR. The proposed rates are: 13% for incomes less than 2.4 million RUR, 15% for incomes between 2.4 and 5 million RUR, 18% for incomes between 5 and 20 million RUR, 20% for incomes between 20 and 50 million RUR, and 22% for incomes over 50 million RUR. This change aims to address the record-setting budget deficit caused by the ongoing conflict with Ukraine and the impact of Western sanctions. Additionally, corporate and property taxes are set to increase, with the new tax measures expected to generate approximately 0.5% of GDP annually in revenue starting in 2025. The legislation, proposed by Finance Minister Siluanov and acting on a February proposal from President Putin, aims to shift the tax burden towards those with higher personal and corporate incomes. Despite the changes, Russia's top marginal tax rate remains the lowest among BRICS nations.