Finance Minister Anton Siluanov
Photo: Vladislav Shatilo/RBC
The Ministry of Finance announced that it will offer lower insurance premiums paid by employers for employees after 2018 and to Fund this maneuver by increasing VAT. The total burden on business should not grow
The Ministry of Finance previously agreed to preserve the basic tax conditions until 2019, back to the discussion of the idea of “fiscal devaluation” — the redistribution of direct and indirect taxes to reduce the direct burden on business. Finance Minister Anton Siluanov said Tuesday on the forum “Trap “new normality” that his Ministry will prepare proposals on “the optimal ratio of direct and indirect load” to load video (mainly in the form of deductions from salaries to social funds) was reduced, the correspondent of RBC. The total burden on business will not grow, the Minister promised.
Later Siluanov Deputy Ilya Trunin explained that we are talking about reducing insurance premiums and the simultaneous increase in VAT. According to him, the Finance Ministry will offer such a maneuver “in each new budget cycle” (quoted by “RIA Novosti”), the proposal could be implemented from 2019 — after the expiration of the moratorium on changing tax environment.
In Russia the burden from taxes on labour paid by employers, is one of the highest among comparable countries ‘ level of development, according to the Ministry of Finance. Total tax rate for Russian companies of medium size is 47.4% of the profits out of which 36.1 per cent — a tax on labor, stated in the study by PwC and world Bank Paying Taxes-2017, published in mid-November. The burden of taxes on labor, Russia is second only to Ukraine and Belarus in the region of Central Asia and Eastern Europe, report.
Due to the fact that a direct load is “large enough” especially in terms of load on the wage Fund, entrepreneurs are motivated to remain in the gray area and evade taxes, said Siluanov. As the Ministry of Finance in the project “Basic directions of budgetary policy” in 2017-2019, in recent years, not accidentally, a decrease of collection of insurance contributions and the declared tax base (payroll) — the informal sector and the “envelope” salary is an obvious advantage to white economy.
In Russia, enterprises shall pay from its own funds contributions to non-budgetary funds — the Pension Fund and funds of social and health insurance (in fact, a direct tax). The current total contribution rate of 30% with salaries from 2019 it would have to grow to 34%. But the government wants to increase from 2019, the total rate only to 30.8% due to the increase of the contribution rate in the HIF 0.8 percentage points, calling it “fine tuning the entire system of social contributions”. It is not clear how the Finance Ministry’s proposals on reducing the insurance premiums will be correlated with the decision of the government.
Fiscal devaluation was mentioned in the recommendations of the International monetary Fund and the European Central Bank to overcome the crisis in the Eurozone. In General we are talking about tax cuts that affect the cost of production (insurance contributions for workers or income tax), taxes on final consumption, such as VAT. In theory it makes goods cheaper and more attractive in international markets, that is, an effect comparable to the devaluation of the national currency.