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Tax Reform Postponed
The government decided not to attempt its much-discussed "22/22 maneuver." This was to include raising VAT to 22% and reducing insurance premiums to 22%. Reforms will be remain on the government's agenda. As the newspaper Vedomosti writes with reference to its sources, the decision to postpone reforms was made on April 12 at a meeting with Prime Minister Dmitry Medvedev.
Vedomosti also reported that sources stated that this was based on forecasts for economic development for 2018-2020 but that the tax maneuver was not formally discussed with President Vladimir Putin, and it is not known if he approves of the project.
What do representatives of business think about abolishing the tax maneuver? Business FM radio asked Boris Titov, the Presidential Commissioner for Entrepreneurs' Rights, this very question. Titov responded that:
"In this discussion of tax reform, the structure of taxes in general continues. It was no Medvedev, but President (Putin) who ordered proposals prepared for reforms to be implemented to the tax system from 2019. On the other hand, the government deliberately and from the outset considered just two taxes: VAT and social insurance payments. In fact, there are a lot of taxes: there is also a special regime for the self-employed, for small and medium-sized businesses, there are issues related to profit tax in connection with VAT and social insurance payments. Do not forget that there is still a property tax. We should consider this system as a whole, for example, including customs tariffs and VAT refunds for exports. This should be a whole range of issues and proposals. You cannot pull out two taxes, change the rates to the beautiful figures "22/22" and have the whole discussion revolve around this. In general, it's good that we are reforming the tax system. The old tax system, the reform of 2002, was very good: the number of taxes was reduced, the tax burden was reduced, but it was for that economy, a stable economy with strict financial control, an economy that had a constant income in the form of oil, and so there was no need to think about development. We are at a new stage. Oil is not the same. We need a new economy, a development economy, and we need a new tax system that stimulates growth."
It is necessary to work through the tax reform as a whole, and not to snatch out any pieces from it, agrees Igor Yurgens, Vice President of the Russian Union of Industrialists and Entrepreneurs:
"There is no sense to take measures piecemeal, because any tax burden imposed on business taken elsewhere and under another article will lead to a general imbalance of the entire system. Therefore, from my point of view, all ideas will be put on the table for the person making the decision. He must make a unified decision and will make this decision depending on many circumstances, including external ones. As Descartes said, everything is connected, and we know about the butterfly effect: in Australia the butterfly flaps and it creates a waterfall at Niagara. Therefore, at the moment no one will tell you whether it will be accepted or not, with absolute certainty. This, of course, is seen as a tax maneuver, it suits some categories of business and does not exactly suit others, this can cause doubts among consumers and the financial authorities of the Russian Federation. We will wait and see."
In March, the Ministry of Finance proposed to reduce the aggregate rate of insurance premiums paid by employers from 30% to 22% of salaries. At the same time, it was proposed to increase value added tax from 18% to 22%. According Minister of Finance Anton Siluanov, this configuration will be "budget neutral." At the same time, the ministry proposed to cancel the reduced rate of insurance premiums for large salaries over 876,000 rubles. The new rate would be unified - 22% for all Russians.
Translated by Alinga Consulting Group.
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