Russia introduces a progressive taxation scale to finance the war
10 July 2024 17:01
The State Duma of the Russian Federation has unanimously approved a draft law on the introduction of a progressive personal income tax (PIT) scale. This was reported by [Kommersant] with reference to KRAPKA.MEDIA.
This decision marks the largest tax increase in Russia since the beginning of the 21st century.
Under the new law, the tax rate will vary depending on the level of income.
- For incomes up to RUB 2.4 million per year (RUB 200 thousand per month), the rate remains unchanged at 13%.
- Income between RUB 2.4 million and RUB 5 million per year will be taxed at 15%.
- For income from 5 to 20 million rubles per year, the rate will be 18%.
- Income from RUB 20 million to RUB 50 million per year will be taxed at a rate of 20%.
- The highest rate of 22% will be applied to income exceeding RUB 50 million per year.
These changes will not apply to “participants in a special military operation” – they will pay taxes at a reduced rate.
Russian experts believe that this tax increase will help the Kremlin finance the war in Ukraine.
It is noteworthy that this year the Russian federal budget allocated a record 10.8 trillion rubles for defence. The share of military spending in the budget will reach almost 30%, which is unprecedented since the Soviet era.
Progressive taxation scale
A progressive taxation scale is a system where the tax rate increases with the taxpayer’s income. Its basic principle is that the higher the income, the higher the percentage of tax paid. The purpose of such a system is to distribute the tax burden fairly and reduce economic inequality in society.
The mechanism of the progressive scale involves dividing income into bands, each of which is taxed at a different rate. The advantages of this system include reducing the tax burden on low-income groups, increasing budget revenues, and potentially narrowing the gap between rich and poor. However, there are also disadvantages, such as a possible reduction in the incentive to increase income and the risk of tax evasion by high-income earners.
Progressive taxation is widely used in many developed countries, including the US, UK and Germany. An alternative to this system is a flat tax rate that is the same for all income levels. Variations of the progressive scale may differ in the number of tax bands and the size of the rates.
Thus, by using the progressive taxation model, the Kremlin is sending a signal that the war will be financed by the rich, not the poor.
