The State Duma proposed to raise the personal income tax for millionaires to 30%

The State Duma has proposed to raise the personal income tax rate to 30% for Russians with an annual income of over 10 million rubles. The corresponding bill was submitted by deputies of the Communist Party of the Russian Federation, headed by the head of the faction, Gennady Zyuganov.

The authors of the document propose to amend Art. 224 (tax rates) and 225 (tax calculation procedure) of the Tax Code. The deputies intend to maintain the 13% rate for citizens with an annual income of up to 5 million rubles and the 15% rate for Russians earning up to 10 million rubles a year, and to increase the personal income tax to 30% for the rest. If passed, the law will apply to income earned from January 1, 2023.

The MEPs explained the need for such an initiative with the growing budget deficit. The authors of the document note a decline in general revenues and oil and gas and, onbased on the estimates of anonymous experts, they said that by the end of the year the deficit will be about 5 trillion rubles. The Ministry of Finance’s estimate of a deficit of 2.9 trillion was deemed an “unlikely” scenario by the Communist Party of the Russian Federation. The proposed plan to increase the personal income tax rate to 30% will increase budget revenues to about 650 billion rubles in the reporting period, according to the draft law.

The package of documents submitted to the State Duma also includes the government’s position on the bill. It states that the law cannot be applied to income from January 1, 2023, because the tax liabilities are “non-retroactive”. In addition, the government emphasizes that the increase in the income tax rate will cause “wages to go into the shadows, reduce revenues to budgets from personal income tax” and reduce insurance premiums.

Due to the costs of the war, the hole in the Russian budget for four months of 2023 has grown to 3.4 trillion rubles. During this period, Russia spent 11.2 trillion rubles – 26% more than a year ago. At the same time, revenues from oil and gas resources continue to fall: in four months they fell by 52% compared to last year, to 2.82 trillion rubles.

Problems with spending appeared in the first month of 2023, but initially the Ministry of Finance explained it by “financing”. “Some of the expenses” were decided to be postponed to the beginning of the year, so that “the conclusion of contracts would not hold,” Russian Prime Minister Mikhail Mishustin explained in the State Duma. Nevertheless, the deficit only increased within four months.

To remedy this situation, the Ministry of Finance may resort to raising taxes for citizens, predicts the head of the Macroeconomic Research Center of Sberbank, Prof. Russian School of Economics (NES) Oleg Shibanov. According to him, this will primarily affect wealthy Russians. “Some of the taxes that will be introduced will rather look like ‘social justice’ taxes,” he explained (quoted by Reuters).

In 2021, Russia has already increased the income tax for wealthy citizens. Then, for earning more than 5 million rubles a year, the rate was raised from 13% to 15%.