Russia to abandon flat tax after almost two decades, will start moving back to progressive system – Putin

Russia is planning to introduce a progressive tax regime, adding a 15% tax bracket for those earning over five million rubles ($72,000) a year, President Vladimir Putin said. The money will be used to treat severely ill children.

In a televised address on Tuesday, Putin explained that a tax hike would raise approximately 60 billion rubles a year ($870 million), with Russia’s highest earners paying an extra two percent tax on their income. The rate for all other Russians will remain unchanged at 13 percent.

He said that the tax increase will be used to treat children with serious illnesses, removing the need for parents to seek assistance from charities or to crowdfund help.

Russia’s income tax rate has been set at a flat rate of 13 percent since 2001, and the introduction of a separate tax bracket, due to begin in 2021, will be the first significant change to the personal tax rate in almost twenty years.

As well as the personal income tax changes, the president also announced other taxation adjustments, including a decrease in the tax on IT companies from 20 percent to three percent. This would make Russia competitive with countries like India and Ireland, who are currently two of the most attractive locations for the IT sector. He also proposed the introduction of a simplified tax code for Russian tax residents, who also own foreign assets.

According to Putin, the new tax changes are permanent and will not just be a temporary fix to deal with the economic fallout from Covid-19.

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