Shuvalov commented on the idea of lower rates on insurance premiums up to 21%

Igor Shuvalov

Photo: Ekaterina Kuzmina / RBC

The government is discussing various options related changes in insurance contributions and VAT, told reporters the first Deputy Prime Minister Igor Shuvalov. He commented on the issue of setting both rates at 21%

Answering a question of journalists, whether the government is considering a scheme with a reduced rate of insurance contributions from 30% to 21% and increase of VAT from 18% to 21%, Igor Shuvalov said: “It may be different, depends on how the outcome of the discussion.” According to him, the authorities are discussing tax design together with insurance contributions which should be included as a new proposal for the medium term. “But it’s not before next year”, — said Shuvalov at the forum of the Russian export centre in Moscow, reports RBC.

At the same time, Deputy Minister of Finance Ilya Trunin told reporters that the Finance Ministry is not ready to come up with a proposal to reduce insurance premiums up to 21% and increase VAT to the same level. According to him, the Ministry of Finance while there are no fundamental proposals for setting up of the tax system. Economic development this initiative is also not played, the official said.

14 February, RBC reported, citing three officials that the economic development Ministry and the Finance Ministry are discussing a working version of the tax maneuver, suggesting the decline in the overall rate of insurance contributions to social funds and 21% (applied to employees ‘ salaries) and a simultaneous increase in the VAT rate to 21% (applied to the cost of goods and services). In December 2016, Russian President Vladimir Putin instructed in 2018 to reconfigure the tax system to stimulate business activity and improve the competitiveness of enterprises (changes should come into effect from 2019, after the moratorium on changing tax environment). One of the sources of RBC said that “21 vs 21” not the final version. According to “Vedomosti” also discusses options 20/22, and 22/22, 21/22 (fees/VAT).

The meaning of the changes is to reduce the direct fiscal burden on employers and to compensate for lost revenues by increasing indirect tax (VAT). Thus, in theory, reduce the cost of Russian products and boost their export competitiveness, however, the extra burden will fall on the Russian consumer (as VAT is included in final price). In addition, the financial-economic bloc hopes that the lower premiums will encourage the release of labour from the shadows, elimination of “envelope schemes” pay.

The chief ideologist of the tax maneuver — the Minister of economic development Maxim Oreshkin, who worked until November 2016 the Ministry of Finance. In January 2017 he called the shadow employment is one of the main problems of the Russian economy, a key issue in the tax area — high level of burden on the wage Fund.

The Ministry believes that the shadow employment we need to fight by other methods, and a radical reduction of the tariff premiums will increase transfers from the Federal budget to social funds. For example, the contribution rate to the Pension Fund now is actually 22% (reduced level is generally established 26%), and this reduced level of budget necessary to pay the transfer.

Leave a Reply

Your email address will not be published. Required fields are marked *