The country’s wealthy elite could face higher income taxes, according to a proposal introduced by Russia’s Finance Ministry on Tuesday.

The proposal, which will likely have to pass parliament for approval and then be signed by President Vladimir Putin, comes at a time when Russia is spending huge amounts of money on the military operation in Ukraine.

The proposal calls for a progressive tax on personal income and represents a change from the current flat-rate tax, which was credited with bringing order and improving tax collection after it was introduced in 2001.

It envisages a 13 percent tax on income up to 2.4 million rubles ($27,000) annually. Income above that will be subject to increasingly higher tax rates. The maximum tax will be 22 percent on annual income above 50 million rubles ($555,000).

Finance Minister Anton Siluanov said on the ministry’s website that the increased taxes will affect only 3.2 percent of Russia’s working population. He added in a comment that the level of 2.4 million rubles is almost three times higher than the country’s average salary.

“The proposed progressive scale should not concern the majority of the population,” he said.

The 13 percent flat tax was introduced in an effort to discourage tax evaders and raise state revenue. In 2021, Russia revised the system so that people earning more than 5 million rubles a year would have to pay 15 percent on the amount above the threshold.

The new tax generated additional revenues of 8.3 billion rubles in its first year of implementation, Russian business news site RBC reported.

(Only the headline and picture of this report may have been reworked by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

first published: 29 May 2024 | 8:00 am First

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