Russia’s Finance Ministry proposes return to progressive taxes on personal income

Russia’s Finance Ministry has submitted legislation that would reintroduce progressive taxes on personal income. According to the newspaper Kommersant, which obtained a copy of the draft amendments, the progressive scale would begin with annual incomes exceeding 2.4 million rubles ($27,100) with the following brackets as income rises:

• From 2.4 million to 5 million rubles ($55,445) — 15 percent
• From 5 million to 20 million rubles ($225,785) — 18 percent
• From 20 million to 50 million rubles ($564,460) — 20 percent
• More than 50 million rubles — 22 percent

Higher tax rates would apply only to income earned within the stated brackets, not to the entire earnings. All earnings below the 2.4-million-ruble threshold would remain taxed at the current rate of 13 percent. Salaries and benefits paid to soldiers fighting in the invasion of Ukraine would not be factored into the new progressive income taxes.

According to Finance Minister Anton Siluanov, the reforms are needed to secure “stable and predictable conditions” for individuals and businesses over the next six years. He added that the proposed progressive scale “should not affect the overwhelming majority of the population.” The newspaper Vedomosti has reported that the higher income taxes would likely hit three percent of the country’s working-age population — about 2.5 million people. Vedomosti also reported that officials plan to raise corporate profit taxes from the current 20 percent to 25 percent.

In a press release on Tuesday, the Finance Ministry said its proposal will be discussed at a legislative commission and in a government cabinet meeting. It’s not clear when this will take place.

• In a state-of-the-nation speech on February 29, President Putin proposed “considering new approaches” to taxation to shift Russia’s tax burden “towards those with higher personal and corporate incomes.” On May 14, Finance Minister Siluanov revealed that his agency was exploring the introduction of progressive income taxes for individuals. Roughly a week later, State Duma Speaker Vyacheslav Volodin clarified that any progressive income taxes wouldn’t touch the earnings of soldiers deployed to Ukraine.