Russia Faces Income Tax Hike

by Tatiana Smolensky, Tax-News.com, Moscow

05 March 2002

The newly appointed Secretary to the Russian Tax Ministry announced last week that Russian taxpayers could see an increase in individual income tax of around 2% over the coming years.

According to reports, the Government has been divided over the move, and tax officials recently claimed that an income tax increase was decided upon by the Economy Ministry rather than by their department. This earned them a reprimand from Prime Minister Mikhail Kasyanov, who warned them to participate in the preparation of tax bills more actively in future, and authorised Natalya Aristarkhova to rectify the confusion.

Speaking on Thursday, the Tax Ministry Secretary revealed that a decision had been reached. However, the solution is unlikely to be a popular one, as although the maximum rate of the single social tax - currently 35.6% - is set to be reduced, the burden will be transferred from employers to individual taxpayers, who face an increase of between 1-2% on the income tax rate to compensate.

Amid criticism that this will effectively destroy the main achievement of the Government's tax reform programme, the 13% income tax rate, Ms Aristarkhova attempted to reassure taxpayers. 'This will not happen for several years,' she told Russian newspaper, Kommersant.

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