Russia’s finance ministry has called for an additional 10% social tax for high earners from 2012 and also wants to introduce a unified property tax in 2013. The new taxes would enable the country to finance its infrastructure, military and social spending needs and still run a balanced budget.
Natalia Orlova, chief economist at Alfa Bank in Moscow, says that although the proposed tax on rich Russians will be relatively easy to introduce, the mooted property levy might be trickier to implement.
At present, the overall taxation burden on Russian households is low by international standards, with personal income tax contributing 4% of GDP to the budget, and other household taxes (real estate, land, personal car) just 0.4% of GDP. That is well below the 10% to 15% of GDP common in most developed economies.
"The introduction of the additional tax on high salaries, in our view, is likely not only because it would help rebalance the State Pension Fund, but also because it affects only 6% of workers in the country, those who receive salaries above R60,000 [$2,080] a month," says Orlova at Alfa Bank. She adds that 63% of employees who receive salaries below the national average of R20,000 a month will benefit from a cut in the regular social tax from 34% to 30%.