The Initiative to Introduce a Social Parasitism Tax is Aimed at Putting Individuals Spendings under Control

The Government does not plan to introduce a draft law on introduction of the so-called “social parasitism tax” till the end of 2016. According to Maxim Topilin, Head of the Ministry of Labor, the text of the draft law does not exist yet.

Introduction of the “social parasitism tax” is feasible provided that certain conditions are met and clear objectives set.

The first possible goal of the above initiative is to tax individuals who receive incomes fr om undeclared or secret sources; the fact of receipt of funds from such sources can be determined only by way of assessment of those individuals’ standard of living. Such individuals normally use luxury cars, real property and maintain a life style which requires large incomes.

The other goal is to tax non-working individuals who live at the expense of their relatives and just idle1.
From the information received from the RF Ministry of Labor, it is unclear which objective the above initiative is aimed at as the mechanisms of implementation thereof are fundamentally different.

If such a tax is introduced, different types of administration depending on the goal are to be applied.

Both the categories of individuals use public services, healthcare and other, but they either do not work or hide their sources of income. In other words, they use all the state services and do not make their contribution to financing services they receive. It is unjust in respect to those who pay income taxes and, thus, subsidize those who evade taxes and do not want to work.

If idlers in terms of the meaning of the Russian language are meant here, a different mechanism is required. In this case, the government is to take certain measures to ensure employment of those individuals. Regional authorities should not only offer “some” jobs to ensure employment, but jobs that are in conformity with individuals’ vocation or provide retraining, that is, training with subsequent employment. It is to be noted that most individuals received free of charge education and it means that the state paid for their education and should be interested that those individuals could realize themselves professionally and make their contribution to the country’s GDP.

Regional authorities should be responsible for existence of jobs both for skilled and unskilled workers. With current reduction of jobs and regional authorities’ failure to improve the situation, the government’s additional efforts to ensure employment of individuals will be needed. It is a controversial point as the readiness of regions to take at present a serious responsibility is doubtful.

Referring to the first objective, that is, to control spendings, a special system of administration is to be introduced and it should deal with identification and matching of the cost of the individual’s property (assessment of the standard of his/her living) with that individual’s declared incomes.

The above measure should result in a situation wh ere the individual declares income on the basis of the patent principle or specifies the source of its incomes. In either case, the tax is to be paid to the budget.

The practice of control over spendings is well-known and it is applied, in particular, in a number of countries of the EU and the US. Also, from 1 January 2015 individuals have been engaged in “financing state expenditures by way of payment taxes” in the Republic of Belarus. Tax authorities are in apposition to “carry out control both over declaration of incomes and property and correlation between individuals’ spendings and incomes on the basis of the existing ... data ...” and if the source of income fails to be identified, excess amounts of spendings over incomes are subject to taxation. It is to be noted that the regulatory act which introduced the tax in question envisages a number of measures in the field of employment in the Republic of Belarus.

In any case, such a tax is not literally a “social parasitism tax”. It would be most appropriate to call it control over expenditures. Introduction of the above tax should be preceded by preliminary work not only in the tax legislation sphere, but also in the field of employment to ensure individuals’ constitutional rights to labor.

Natalia Kornienko , Head of the Tax System Development Department

1 Here is an explanation of the Russian word tuneyadstvo (idleness) (in the Church Slavonic language “tune” means “to receive for nothing, free of charge and for no reason”, while “yasti”, to eat). It may also mean “laziness and idleness”, “living at somebody’s else expense” and “social parasitism”. It is a form of social parasitism. Such a person lives at somebody’s else account. S.I. Ozhegov and N.Yu. Shvedov Russian Language Dictionary. 1949–1992.