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A new bill on the introduction of a progressive personal income tax scale

A new bill on the introduction of a progressive personal income tax scale

25 October 2023

The tax rate is proposed to be tied to the amount of income. This will smooth out social inequality and increase the incomes of the low-income population, the deputies explain.

The State Duma has introduced a bill on the introduction of a progressive scale of taxation on the income of individuals. This was reported in the telegram channel by one of the authors of the bill – a deputy from the LDPR faction Yaroslav Nilov. The document proposes to amend the Tax Code by setting the tax rate from 0 to 35%, depending on the amount of income:

  • less than or equal to 360,000 rubles — 0%;
  • from 360,000 to 5 million rubles — 13%;
  • from 5 to 10 million rubles — 603,200 rubles plus 15% of the amount exceeding 5 million rubles;
  • from 10 to 50 million rubles — 1.35 million rubles plus 25% of the amount exceeding 10 million rubles;
  • from 50 to 100 million rubles — 11.35 million rubles plus 30% of the amount exceeding 50 million rubles.;
  • more than 100 million rubles — 26.35 million rubles plus 35% of the amount exceeding 100 million rubles.

When setting the minimum income threshold that is exempt from taxes, the question of replenishing the budget immediately arises, since it depends more on taxation of low- and medium-income segments of the population, the authors emphasize. 

Therefore, it is necessary to significantly increase the personal income tax rate for citizens with high and ultra-high incomes. This, the initiators believe, will mitigate the problem of social inequality and increase the incomes of low- and middle-income citizens. 

Since 2001, Russia has had a flat personal income tax scale with a rate of 13%. Previously, it was progressive — from 12 to 30%, depending on the size of the annual income. In 2021, a new rate appeared – 15% for incomes exceeding 5 million rubles per year.

In the explanatory note to the draft law, it was also noted that, if necessary, in order to eliminate differentiation in tax revenues to the budgets of the constituent entities of the Russian Federation, payments should go to the federal consolidated budget, and then be evenly distributed between the regions.

The Government of the Russian Federation once again did not support the bill on the introduction of progressive personal income tax rates, arguing this rather sparingly:

“The current personal income tax system allows us to talk about a balanced approach that takes into account the interests of both taxpayers and the budget system of the Russian Federation.”

Also, the Government of the Russian Federation referred to its earlier position on the inexpediency of introducing a progressive personal income tax scale.

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    ARAVANA Capital management
    25 October 2023
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