The economist on raising the personal income tax rate: the Government opens Pandora's box

Raise the tax rate on incomes of physical persons (personal income tax), the government destroys a relatively effective tax system created by the reforms of the President of Sberbank German Gref. The credibility of the government will fall, and the substantial revenues it will bring. Such opinion in conversation with the correspondent of “Rosbalt” was expressed by the economist Pavel Usanov.

the Expert recalled that Russia in 90-e years has operated a progressive rate that has demonstrated its inefficiency from the point of view of budget revenues, and in the end it was abandoned.

“Then took a flat income tax, while the rate was one of the lowest in Europe. It has made our economy competitive, it stimulated more people to earn increased tax base. Now is the destruction of all the mechanisms of the beginning of the zero years, which allowed the company to significantly accelerate the pace of economic growth in our country in the first decade of the XXI century,” said Usanov.

In his opinion, the government went on raising the personal income tax rate because of the projected shortfall in the budget that is associated with the lockdown and crisis. However, this option is to support the economy is extremely bad, he said.

“I think it’s the first step to increase the tax burden. Progressive rate is characterized by the fact that as soon as you enter it, you step by step begins to change the system in the direction of increasing the maximum bid. First 15%, then 20%, then 35%… Almost all over the world in the twentieth century was like. Now detectable mechanism to open Pandora’s box, to introduce a progressive system with an ever-increasing rate. In the beginning they pay more those who have income from 5 million, then those who have from 500 thousand, from 50 thousand,” — said the economist.

He suggested that this decision will encourage citizens to concealment of income, will reduce their economic activity, and the credibility of the state Budet inevitably fall.

About raising the personal income tax rate to 15%, said Russian President Vladimir Putin. The measure will affect Russians with incomes over 5 million. The decision will come into force on 1 January 2021.

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