Tax-news.com reported earlier this month that Russia had marked the New Year by introducing a new flat rate tax of 13 per cent, effective January 1, which aims to simplify tax procedures all round and ultimately increase very low tax revenues caused by rampant evasion.
The tax reforms - the most significant for at least a decade - are geared towards enticing members of the wealthier private sector to submit their personal income tax declarations, which have so far not exactly flooded in. Figures suggest that a mere 3.8 million Russians submitted personal tax declarations in 2000. The lower tax for this sector of society is supposed to make people more forthcoming.
Under the new laws the military will also be subject to taxation, and these taxes will go towards regional budgets.
Alongside the new 13 per cent flat rate come new controls to ensure payment - the Individual Taxpayer's Number (INN) is now compulsory for every Russian citizen in order to carry out any fiscal operations. This makes it easier for government tax services to trace capital circulation.
Russian President Vladimir Putin also wants a financial intelligence service or 'tax police' in place which would employ qualified financial analysts to investigate any transactions of more than US$5,000. Moreover, the Russian parliament or Duma is looking into a new money laundering bill.
Russian people have mixed feelings about Russia's changing tax landscape. One said: 'I think people are going to actually pay more, but not because they want to, now that the tax rate is low. They are going to more because they have no choice - with all those new control mechanisms, like the INN'.
Many Russians fear tax rates are only being lowered on a short-term basis. Once people start to cough up and more details become known, they will not be able to go back to their old ways and will be well and truly caught in the tax net, effectively giving the government licence to raise taxes.
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