Putin announces tax increases for Russians

The Russian authorities intend to change the tax system for individuals and businesses with high incomes so that they pay more into the state budget.

Source: Russian President Vladimir Putin during a message to the Federal Assembly, as reported by Moscow Times

Quote: "I propose to consider our approaches to modernising the fiscal system to more equitable distribution of the tax burden towards those with higher personal and corporate incomes," Putin said.

The Kremlin has instructed the government and State Duma to "submit a specific set of proposals and sign into law until 2030."

According to the publication's source, this concerns the implementation of a progressive personal income tax (PIT) system in Russia.

Citizens earning more than RUB 5 million (about US$55,000) per year currently pay 15% of their income in taxes rather than the standard 13%. Putin did not specify the new parameters for the personal income tax.

In addition to personal income tax, they discussed a tax on excess corporate profits – the so-called windfall tax, which was introduced last year as a one-time action but may become permanent.

According to the Russian Federation's Ministry of Finance, this tax generated more than RUB 300 billion (about US$3.3 billion) for the Russian budget. It was paid by businesses, and the average pre-tax profit for 2021-2022 exceeded RUB 1 billion (about US$11 million).

At the same time, the government's reserves are quickly depleting. The National Welfare Fund's liquid assets were reduced by half over the last two years of the war, from US$113.5 billion at the start of 2022 to US$55.9 billion as of 1 January 2024.

In 2024, the Ministry of Finance intends to spend an additional RUB 1.3 trillion (about US$14.300 billion) from the NWF to finance the budget deficit, with the Ministry of Economic Development taking nearly RUB 900 billion (about US$9.9 billion).

Background: 

• In January, it was reported that the Russian Federation's Ministry of Finance would spend nearly half of the liquid portion of the National Welfare Fund in 2023, which is the primary source of the country’s resources for a rainy day – 4 out of 9 trillion rubles.

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