Return of the Single Social Tax Will Help Save Funds for the Budget

In development of anti-crisis measures, the government considers among other things the prospect of abolishment of insurance contributions from 2017 and return to the single social tax (SST) administered by the Federal Tax Service (FTS).

The thing is that administration of insurance contributions by the following three institutions – the Pension Fund, the Mandatory Medical Insurance Fund (MMIF) and the Social Insurance Fund (SIF) -- creates a high burden on the budget at present. At present, it is clear to everyone that it would be more effective if regular payments are collected by the Federal Tax Service (FTS). It is to be noted that the cost of FTS’s operations is much lower than that of the above institutions – the Pension Fund, MMIF and SIF. Amid the crisis, the government is trying to find additional funds for the budget, so it is obvious that economizing on operations of the above institutions may yield substantial amounts of funds to the budget.

The above institutions have failed to live up to expectations of the government after the single social tax was abandoned in 2010. They collect contributions so ineffectively that the government has to pay to collectors hundred times more than they pay to the budget.

The reform related to abolishment of the single social tax has failed. Abolishment of the SST in that architecture which existed prior to 2010 was incorrect: the SST was more effective, it was collected in more efficient way, the government spent less on administration of that tax and the burden on taxpayers was much less substantial.

At present, it is early to say whether the return of the SST is going to be a burden or relief for taxpayers. It is necessary to see the draft law to understand the concept of the new tax. So, at present for the budget the efficiency of return to the SST -- as a measure to save funds on administration -- is explicit.

Natalia Kornienko, Head of the Tax System Development Department