Putin Eyes New Wealth Taxes

by Tatiana Smolenskaya, Tax-News.com, Moscow

10 February 2012

Russian presidential candidate and current Prime Minister Vladimir Putin has announced that, if elected, his government would increase taxes on luxury items as part of a larger reform of the tax system to reduce the country's over-dependence on oil revenues and fund ballooning government expenditure.

Without elaborating on the measures at length, Putin said that new taxes should be imposed on "excessive personal consumption" such as purchases of superyachts, private aircraft, supercars and luxury real estate. Levies should also be increased on alcohol and tobacco, Putin said.

Putin underscored that his government would not seek to tax companies' reinvested profits as part of the plan, but did not clarify whether private aircraft used for business purposes would be subject to the levy.

Putin faces the challenge of reforming the nation's fiscal regime to compensate for the massive increases in government expenditure witnessed in recent years. Russian coffers are highly dependent on revenues from the oil sector and taxes on employment, such as social security contributions. An incoming government in Russia faces the challenge of shifting the tax burden towards consumption to revenue sources that are simple to enforce and are not commonly subject to evasion.

Recommended