Tax increase: reasons, laws, effective date, list of taxes, rates and benefits

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

The tax system is an important source of funds for the state budget, from which many institutions and social services are paid. In 2018, major changes took place in Russia: a number of tax rates increased, and new taxes also appeared. You can read more about the tax increase and how it will affect the well-being of ordinary people in this article.

Tax increases

In 2018, serious changes took place in Russia. Before people had time to come to terms with the increase in the retirement age, the news appeared that they were going to increase the rate of a number of taxes. The bill was submitted for consideration in the spring, and in the summer a final decision was made to increase income for added value. The changes will affect everyone, regardless of status and age. After all, the increase in VAT affects all goods and services, as well as food products that are in demand among all categories of citizens. At first glance, the increase in taxes is completely imperceptible: on average, theywill increase by only 2-3%. All changes will take effect from January 2019.

The opinions of experts and politicians on the issues of discussing tax increases have diverged. Some believe that this is a premature measure that will only slow the growth of the economy. Others are sure that this will help ensure the growth of the well-being of pensioners and other vulnerable segments of the population. After the increase in the tax rate, the burden will primarily fall on small and medium-sized businesses. As a result, the rise in prices of goods will be felt by everyone. Only large manufacturing companies will be able to contain price increases through sales.

Which taxes will be raised?

In what areas is it planned to increase the tax rate? It is known for certain that the following taxes will increase in 2019:

• VAT will increase from 18% to 20%.
• Excise payments for certain groups of goods (cigarettes and tobacco).
• The personal income tax rate will become progressive for people with an income of more than 3 million rubles.
• The marginal base for insurance premiums will grow by 10-15 percent. The increase in pension taxes is intended to increase the amount of pensions for older people.

Despite the fact that so far few taxes have actually been raised, the process of introducing tax innovations has already begun in Russia. Most likely, the period of reform of the tax system will take more than one year, so you should not hope that the changes will end there. Russian President V. V. Putin officially promised that there would be no increase in income tax in 2018, and he kept his word. But there are already heated discussions in the governmentincreases and other tax rates. What projects are accepted for consideration?

Income tax

Personal income tax - aka income tax - is a mandatory tax for all residents of the Russian Federation, which is paid from the money received. For the main part of the population it is 13%, and only for some categories of citizens with high incomes - 35%. In March 2018, a draft law on increasing personal income tax from 13 to 15% was submitted to the State Duma. Most officials have approved it, but no changes have yet been made. The increase in the tax rate caused a lot of discontent among the population. Since the pension reform had already been carried out in 2018, the Ministry of Finance published a letter to citizens, which explained that the tax would not be changed this year. Despite the deficit in the budget of the Russian Federation, no increase in the tax rate is planned in 2019 and 2020.

Increasing income tax can bring not only harm, but also good. Experts are confident that a two percent rate increase will not play a significant role in people's daily lives. And thanks to such a campaign, about 600 billion rubles will appear in the budget, which will be used for the needs of the population. In 2018, the economy is not growing, and the reserve sources of budget funds are running out, so sooner or later the government is likely to approve an increase in personal income tax. But in the next few years, you can not worry about raising income taxes.

VAT

VAT is a value added tax that helps bring a lot of money into the budget. The tax is charged on all goods andproducts that are sold at a price above their cost. Increasing the tax to 20 percent is one of the biggest news of 2018. The government decided to raise the VAT in order to eliminate the budget deficit. At the same time, a 2 percent increase in the tax rate will bring an additional 600 billion rubles. But is this measure justified? After all, an increase in VAT will affect the cost of goods and services, as well as seriously hit small and medium-sized businesses. What do experts think about this?

Increasing VAT taxes will increase the rate of inflation. In addition, it will hit the most vulnerable areas that have already suffered after numerous crises and sanctions: high-tech production, mechanical engineering. This will also affect the population, especially those people who are already below the poverty line. Increasing the tax to 20% would raise the cost of virtually all food and essential goods. The government plans to introduce preferential categories of products for which the tax rate will not increase: these are medical, children's products and some others.

According to officials, the increase in VAT is necessary for government needs and to stimulate economic growth. But an increase in the tax rate will only reduce the development of the economic system, and most of the small enterprises will cease to exist altogether. Therefore, experts are skeptical about these changes and do not believe in the positive impact of the reform.

Changes in other taxes

Although the increase in VAT and personal income tax are the most discussed topics in 2018year, these are not the only changes that have taken place in the tax system.

Starting from 2018, there will be changes to the transport tax. Citizens will be allowed not to pay longer: from now on, the deadlines will be shifted to December, which will allow them to accumulate the required amount.

Property tax will be calculated based on the cadastral value of the object. Thus, even if you purchased land worth 200 thousand, and in a few years it is already worth 500 thousand, then the tax will be calculated for you at the last digit.

In 2018, the real estate exemption, which exempted from paying taxes in the event of the expiration of the limitation period, will be canceled. This was sad news for many owners, because now they will have to pay 13% of the cost of housing to the state treasury anyway.

In 2018, a resort fee was introduced, which is charged when entering some regions of Russia. The changes affected the Altai, Krasnodar, Stavropol regions and the Republic of Crimea. The changes will not affect privileged categories of the population.

All legal entities and individual entrepreneurs are required to switch to online cash registers, which will help the state track payments and keep accurate records of income. Now all stores and retail outlets must have an online checkout.

Increased trading fee. In 2018, the new rate is 1,285.

In the oil field, a tax on additional income will be introduced in 2019. The main objective of this tax is to stimulate the development and production of oil in mature fields.

The State Duma is under discussionbill to introduce a tax for self-employed citizens. If it is passed, the changes will affect 22 categories of citizens, including plumbers, tutors, hairdressers, photographers and freelancers.

Why increase taxes?

In May 2018, the President issued a decree setting a goal for the coming years. It includes the socio-economic development of the country, as well as improving the welfare of citizens. As part of the implementation of these laws, pension and tax reforms were prescribed, which should contribute to the rapid implementation of the goals. Experts have calculated that it is planned to spend about eight trillion rubles to implement the decree. At the moment, there is no such money in the treasury, which is why it was necessary to resort to such a measure as raising taxes in Russia. Part of the necessary funds will be received by raising the retirement age, and the rest by increasing VAT.

Russia currently has one of the lowest value-added taxes. In Europe, the standard is 20-23% of the value of the goods. The highest rates are in Finland and Norway, while the lowest rates are in Singapore and Thailand.

How this will affect the wallet

The VAT rate has been constant since January 2014. When the tax is raised, producers are unlikely to work to their own detriment. With a high degree of probability, they will include the amount of VAT in the final cost of the goods, and the entire burden of the tax burden will fall on the shoulders of consumers. On the one hand, raising taxes can bring new funds to the budget. FROMon the other hand, many doubt whether this money will be used for the benefit of the population. In addition, the purchasing power of Russians is at the limit. High inflation and an endless series of crises have led people to spend their money very economically. After the VAT increase, people will start saving even more, which will eventually lead to lower consumption. Many branches of production will turn out to be unclaimed and will shrink, as a result, the economy will also slow down its growth. As a result, the country's budget will continue to shrink.

Experts of banks believe that the increase in VAT, as well as income tax in the future, will not bring anything good, except for momentary benefits. In the future, the Russian economy will undergo negative dynamics, and the vulnerable segments of the population will not be able to buy even essential products.

Pros and cons

In 2018, there were many topics for discussion: the World Cup, the increase in VAT, the rise in gasoline prices, the increase in the retirement age. Many changes do not allow disputes to subside so far. Some experts are of the opinion that the reforms were necessary, and without them the further development of the country is impossible. Others argue that the attracted trillions of rubles will not change the standard of living of Russians in any way, but they can lower them. Who's right?

Some Russians are not against tax increases. After all, in the future, this can provide them with a comfortable old age and a better quality of life. The problem is that the tax system in Russia is nottransparent, and the population cannot see what needs the budget funds are used for. Meanwhile, the VAT rate has risen; income tax is likely to rise in the next five years. Taxes on fuel excises also increased strongly during 2018, which ultimately contributed to the increase in gasoline prices. Experts fear that by the end of the year the price per liter will exceed 50 rubles. The increase in the cost of fuel, coupled with the increase in the VAT rate, further increases the final cost of goods. Manufacturers will try to offset the costs of logistics transportation, which will lead to higher prices for the final product.

The question is, will the funds received really go to the benefit of the population? The Russians themselves are rather skeptical about this issue. The experience of the past few years clearly shows that raising taxes and introducing new ones not only does not spur the economy and purchasing power, but also contributes to the deterioration of the current situation. Over the past few years, more than half a million small enterprises have closed in Russia, which clearly demonstrates the “effectiveness” of such a program.

Expert Opinion

Despite the dissatisfaction among the people, State Duma officials assess the upcoming changes mostly positively. Andrei Makarov states that the funds received are necessary for the state budget and will go to the development of he althcare, infrastructure and social spheres. In response to questions about the increase in transport excises, officials note that price fluctuations will not be significant. WhatAs for VAT and its impact on industry, then, according to the head of the Ministry of Industry and Trade, there will be no negative impact here either. Many experts talk about rising inflation, but Andrey Makarov promises that this is a temporary phenomenon, and the situation will soon stabilize. The government expects an increase in the number of investments and a reduction in unemployment. In general, State Duma employees expect only positive changes that will improve the well-being of citizens.

Results

Paying taxes is mandatory for all developed countries. It is at the expense of budgetary funds that the government provides medical care to the population, education, and the construction of new infrastructure facilities. Funds are taken from the federal budget for the payment of pensions and benefits for vulnerable segments of the population. The reduction in economic growth in Russia has led to the need for significant changes in many structures, including the tax one. In 2018, changes were made to a number of taxes: property, land, transport, resort. From January 2019, the VAT rate will be increased from 18% to 20%, and there are already disputes in the State Duma about increasing income tax in Russia. Experts disagree on whether these changes will be positive. How sustainable small businesses will turn out to be, and whether many taxpayers will want to “go underground” because of the overwhelming burden, time will tell. So far, Russians should expect only an increase in commodity prices starting in January 2019. At the same time, the changes will not affect the vital categories:medicines, baby products and some products.