NATALIA KORNIENKO: EXEMPTION OF LOW INCOME PERSONS FROM PIT IS A VERY SENSITIVE ISSUE
Natalia Kornienko, Head of Tax System Development Department of the Gaidar Institute, commented to radio station “Govorit Moskva” the proposal to exempt low-income people from PIT.
Reaction of Russian Prime Minister Dmitry Medvedev to the initiative of VTB Head Andrey Kostin about the rationale of exempting low-income people from paying personal income tax (PIT) was discussed by “Information Channel”.
According to Medvedev, dividing citizens by their income in the tax legislation is a “sensitive” issue and it can serve as a pretext for splitting society, as a number of citizens may consider themselves unfairly bypassed.
Natalia Kornienko expressed her opinion:” In this case, I agree with the Prime Minister. It is a very sensitive issue and heavily related to geographical specifics of this country. Russia is largely territorially expanded, regions experience different level of economy and citizens have different income”.
Therefore, careful calculations are required in order to establish a tax-free minimum for different territories. “It is not that simple,” the expert noted. “Among other things, those who receive an assumed 101 rubles and are subject to taxation, may wonder: why in the end they receive less than those whose income is 100 rubles and they are exempted from personal income tax?”
According to Natalia Kornienko, this initiative is not actually associated with the intention to grant privileges to low-income population. “What it involves, is a change in the approach to calculating personal income tax rates: currently, it is unique for everyone and amounts to 13%. “However, Mr. Kostin said more than media quoted. He said that he was prepared to pay a higher rate on his income. Thus, in fact, this is not about a privilege for the low-income, rather, it is about a change in the flat personal income tax rate, that is, the very principle of levying income taxes, ”said Kornienko.
However, according to Korninenko, it is too early to talk about it as all efforts are hurled into legalization of personal incomes, and it is suggested to expand the category of self-employed in order to achieve this goal. “Thus, on one hand, we are trying to prove the innocence of our economy, while on the other hand, we want to propose to increase tax burden of individuals. Therefore, we should not equalize incomes in this manner. Let the regions provide more job opportunities with adequate wages”: Natalia Kornienko said.
According to Medvedev, dividing citizens by their income in the tax legislation is a “sensitive” issue and it can serve as a pretext for splitting society, as a number of citizens may consider themselves unfairly bypassed.
Natalia Kornienko expressed her opinion:” In this case, I agree with the Prime Minister. It is a very sensitive issue and heavily related to geographical specifics of this country. Russia is largely territorially expanded, regions experience different level of economy and citizens have different income”.
Therefore, careful calculations are required in order to establish a tax-free minimum for different territories. “It is not that simple,” the expert noted. “Among other things, those who receive an assumed 101 rubles and are subject to taxation, may wonder: why in the end they receive less than those whose income is 100 rubles and they are exempted from personal income tax?”
According to Natalia Kornienko, this initiative is not actually associated with the intention to grant privileges to low-income population. “What it involves, is a change in the approach to calculating personal income tax rates: currently, it is unique for everyone and amounts to 13%. “However, Mr. Kostin said more than media quoted. He said that he was prepared to pay a higher rate on his income. Thus, in fact, this is not about a privilege for the low-income, rather, it is about a change in the flat personal income tax rate, that is, the very principle of levying income taxes, ”said Kornienko.
However, according to Korninenko, it is too early to talk about it as all efforts are hurled into legalization of personal incomes, and it is suggested to expand the category of self-employed in order to achieve this goal. “Thus, on one hand, we are trying to prove the innocence of our economy, while on the other hand, we want to propose to increase tax burden of individuals. Therefore, we should not equalize incomes in this manner. Let the regions provide more job opportunities with adequate wages”: Natalia Kornienko said.