Vladimir Putin instructed to examine the issue of introduction of a regional sales tax and increase of deductions to the Compulsory Medical Insurance Fund

16th July 2014

According to the Ministry of Economic Development, increasing the tax burden can have a serious impact on the business

Introduction of a regional sales tax in Russia and increase of allocations to Compulsory Medical Insurance Fund starting from 2015 is almost a settled issue, the newspaper “RBC daily” says. Russian President gave instructions to elaborate on proposals of the Ministry of Finance, government officials say.

Effects of higher tax burden are now calculated by the Ministry of Economic Development together with business community.

“According to preliminary estimates, it will increase the burden greatly, especially for engineering, manufacturing enterprises and agriculture”, - said the deputy head of the Ministry of Economic Development Sergey BELYAKOV. In addition, plans of authorities to create a large number of highly productive jobs are under threat because removing the salary thresholds for contributions to the Compulsory Medical Insurance Fund increases the burden on such jobs.

The Ministry of Finance’s initiative to introduce three-percent sales tax in regions without canceling similar VAT is subjected to harsh criticism as soon as it was announced by the Minister Anton SILUANOV. Experts recalled that once this tax was abolished in Russia after being recognized unconstitutional and pointed to the risk of inflation and a suffocating effect on business. On the other hand there are annual revenues of about 200 billion rubles.

The government is discussing about a dozen initiatives somehow increasing the tax burden on business. Some of them proposed to introduce next year: the abolition of federal benefits on regional taxes, property tax for small businesses using a “simplified tax system”, cancel “simplified tax system” for certain activities. Other initiatives, such as VAT and Personal Income Tax increase by 2 percentage points are discussed to be introduced in 2019.

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