The Russian government is on the hunt for new revenues to meet its ambitious RUB12 trillion ($180mn) spending plan.
A VAT hike from 18% to 20% went into effect that will provide some new money, but most is coming in from an IT overhaul of the tax service that saw revenues in 2018 soar by a whopping 22%, while the overall tax burden remained more or less the same. It is also due to a clampdown on Russia’s shadow economy.
Very little of the revenue increase can be attributed to increased taxes as the tax burden in Russia remained largely unchanged in 2018 and is already very low by European standards.
Most of the tax burden increases were laid on things that can bear heavier taxes: the fuel and energy complex, alcohol and tobacco. The tax burden in all other sectors remained the same, according to the Federal Tax Service (FTS).
A considerable part of non-commodity sectors of the economy showed a rapid increase in the payment of taxes, which has been attributed to the tax service effectively closing down scams and bringing more of the shadow economy into the light.
According to the preliminary estimates of the FTS reported by Kommersant, tax revenues will nominally grow by about 22% by the end of 2018, after rising by 19.8% in 2017. And these increases do not correlate with the expected dynamics of GDP growth in 2018, the dynamics of industrial production, or with the dynamics of consumption, which were all changing ten times more slowly.
According to the data for the three quarters, the tax burden for legal entities was 11.5% of turnover, an increase of 0.7 percentage points compared to 2017. The largest increase in the load was recorded in the fuel and energy complex, where it increased from 45.4% to 52.1% due to an increase in the mineral extraction tax.
In the “Food, beverages, tobacco” processing sub-sector, the tax burden was formally reduced from 28.2% to 23.5%, but this is more of a counting effect due to a reduction in the production of tobacco products and alcohol amid rising excise taxes.
Finally, in industries with unchanged tax rates in 2018, the level of tax burden remained stable at 7.9% of turnover.
At the same time, the fiscal burden on social benefits for individuals, calculated in the same way, even slightly decreased — from 3.6% of the employer's turnover to 3.5%. The decrease also occurred in the fuel and energy complex (from 1.8% to 1.7%), and processing in general (from 2.2% to 2.1%).
Kommersant has previously published data on the stability of the tax burden on the incomes of natural persons in 2018 — cumulatively it was 13.34% in 2017, including 12.29% for personal income tax. There are no estimates for 2018 yet, with estimates due to be released in April 2019.
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