Russian Parliament Approves Progressive Tax for Wealthy

The Russian parliament's lower house has given final approval to a bill intended to raise income taxes on the wealthy. The bill, which enforces a progressive tax on personal income, aims to increase government revenue amid the Ukraine conflict. It awaits approval from the upper house and the president.

The Russian parliament's lower house has given final approval to a significant new tax bill aimed at increasing income taxes for the country's wealthy. This legislative move is designed to bolster government coffers as the conflict in Ukraine continues.

The State Duma has endorsed the bill in its final, third reading. For it to become law, it still needs the green light from the upper house and the signature of President Vladimir Putin. The proposed legislation represents a major shift from the flat-rate tax system introduced in 2001 that has been widely credited with improving tax collections.

The new bill recommends a 13 percent tax rate for incomes up to 2.4 million rubles (USD 27,500) annually. For incomes above that threshold, the tax rate will progressively increase, capping at a maximum of 22 percent for annual incomes exceeding 50 million rubles (USD 573,000).

President Putin has stated that the new tax increases would impact no more than 3.2 percent of Russia's taxpayers. Additionally, the bill includes a provision to raise the company income tax rate from 20 percent to 25 percent. The reform is expected to generate 2.6 trillion rubles (USD 29 billion) in federal revenue by 2025.

Russia initially implemented a 13 percent flat tax rate after President Putin's first election in 2000 to combat rampant tax evasion and enhance state revenue. In 2021, modifications were made so that individuals earning more than 5 million rubles annually would pay 15 percent on the excess amount beyond that threshold.

(With inputs from agencies.)