Russian President Vows To Keep 13% Tax Rate

Tatiana Smolenska, Tax-news.com, Moscow

15 February 2001

As reported by Tax-news.com in January, Russia's most significant tax reforms for a decade came into force on New Year's Day, bringing income tax down to a flat rate of 13 per cent and putting Russians among the world's least taxed people. The single income tax rate had been on the cards for some time, the Russian parliament having voted overwhelmingly to adopt it back in July 2000, and Russian president Vladimir Putin said last week at a national conference of tax officials in the Kremlin that the 13% rate is secure and will not be changed in the next few years.

Many Russians have voiced fears that the uniform tax rate has only been introduced on a short-term basis. The concern is that once people start to pay up and more details become known, they will not be able to go back to their old tax-evading ways and will be well and truly caught in the tax net, effectively giving the government licence to raise taxes. Yet Putin stressed this week that 'no changes in the tax sphere should worsen the position of the taxpayers'.

Putin said that the government is holding fire on further business tax changes because it wants to see exactly what effect last year's batch of changes have on Russian business. Instead the government will continue to clamp down on persistent tax evaders and will consider appropriate amendments to the current legislation, including a possible rule making the tax authorities responsible for the registration of business entities.

The whole point of the shake-up in the Russian tax system was to curb rampant tax evasion and Putin is evidently pleased at the way things are going. The tax authorities pulled in a much higher volume of taxes in 2000 than in 1999; but Putin told told tax officials: 'This is not only your merit but it also shows a general economic growth in the country.'

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