Alexey Sazanov states that there is no implementation of a new scale for the NDFL currently in progress.
The Russian Ministry of Finance has been busy making adjustments to the country's tax system, but the performance of the newly introduced 5-tiered income tax scale remains a topic of ongoing analysis.
While the Ministry is content with the current mechanism for calculating taxes based on the price of Russian Urals and premium ESPO, there are other significant changes underway. The government is considering implementing the model rules of Pillar 2, which would introduce a minimum corporate income tax rate of 15% for multinational groups with an annual turnover of more than 750 million euros.
However, the implementation of these changes is taking place amidst a turbulent global economic climate that affects tax revenues. The Russian economy is struggling due to a combination of factors, including high interest rates, economic slowdown, a strengthening ruble, and a decline in oil prices.
One of the challenges faced by the Ministry of Finance is the delay in transitioning to calculating the tax base for exporting companies in rubles. This is due to the use of global prices in calculations to avoid manipulation and negative impacts on budget revenues.
Despite these challenges, federal budget revenues for both profit tax and VAT are in line with plans and slightly ahead of last year's figures. However, revenues from mineral extraction tax, export, and import duties have decreased due to external factors.
The Ministry of Finance is also engaged in negotiations to conclude new or review existing double taxation avoidance agreements with Azerbaijan and Bahrain, and is conducting expert-level consultations. Additionally, they are working on preparing proposals to adjust the parameters of the UST, including reducing the threshold for becoming a VAT payer, but not before 2028.
One area that remains a challenge is the assessment of the performance of the new 5-tiered income tax scale. While Russia introduced a progressive income tax scale starting in 2021, with multiple tax brackets replacing the previous flat tax regime of 13%, detailed data on the scale's performance is not readily available.
Typically, one would look at factors such as revenue collected under the new scale versus previous years, impact on taxpayer compliance and economic behavior, effects on income inequality and government budgeting, and administrative costs and enforcement challenges. Since this data is not available from the provided sources, it is difficult to make objective conclusions about the scale's performance.
The Ministry of Finance is also considering various other tax-related adjustments, such as an additional 10% tax on the super profits of banks and raw materials companies, and limiting the amount of tax incentives provided to the volume of investments and R&D spending for regions with preferential tax regimes.
In conclusion, while the Russian Ministry of Finance is making significant strides in reforming the country's tax system, the performance of the new 5-tiered income tax scale remains a work in progress. As more data becomes available, a clearer picture of the scale's impact on the Russian economy will emerge.
The Russian Ministry of Finance is contemplating the application of Pillar 2 model rules, which proposes a 15% minimum corporate income tax rate for multinational businesses with yearly turnovers surpassing 750 million euros. Concurrently, the assessment of the effectiveness of the newly instituted 5-tiered income tax scale is still under close scrutiny in the realm of finance and business.
