Stakes made and grounds are clear

Taxation system to undergo change

The Tax Code is being amended, including increased excise rates on alcoholic beverages and cigarettes. In addition, banks and insurance companies will be paying greater profit taxes, and income tax is to rise from 12 to 13 percent: the most controversial aspect. The Deputy Head of the Individual Taxation Department at the Ministry for Taxes and Duties, Svetlana Shevchenko, tells us more.

Tax Code slightly corrected
Tax Code slightly corrected

Is income tax an important contributor to the budget and why is it being raised?

Individual income tax payments comprise 19 percent of the consolidated budget: second only to VAT. In 2009, the progressive taxation scale (regarding individuals) and aggregate declaration was abolished, while tax administration was simplified, resulting in more income tax payments being registered. The present increase is necessary to create an additional source of funding for the state budget, for use in supporting families with children. In fact, income tax in Belarus is among the lowest in the world.

Do you personally advocate a progressive scale of taxation?

Globally, progressive taxation is viewed as being fairer: those with greater incomes pay more tax. However, this is common for states with greater income stratification than is evident in our society. At present, it’s more feasible to apply a single rate to individual income tax.

Is it too early to introduce a ‘luxury tax’?

Citizens who own property or land pay property tax, which is a kind of ‘luxury tax’. We aren’t considering any other property tax at present.

Are any changes planned regarding tax deductions?

Last year, we adopted the Presidential Decree ‘On Leasing Activity’ (not for entrepreneurial activity). Those registered on the list as in need of better housing will receive tax deductions on the amount they spend on leased accommodation from January 1st, 2015 (a concession on their income tax). Meanwhile, social and standard tax deductions have been indexed to inflation.

What other amendments are planned to the Tax Code?

To prevent tax avoidance, individuals are now obliged to declare income received on loans and credits granted to Belarusian legal entities. Taxation will be due on any profit gained, although there will be exemptions for loans repaid within a certain period and those involving close relatives, trustees or guardians. A loan given to a neighbour until they receive their new salary would be exempt but any profit derived from illegal business activity or other shady activities will come under greater scrutiny.

Tax officers will gain access to individuals’ foreign currency exchange deals. Who’ll come under focus?

We’ll primarily focus on those who conceal their income or have no official employment, while buying large sums of foreign currency. In the Brest Region, we’ve detected an unemployed woman who bought $75,000 over a two-year period. We also know of a pensioner has exchanged $5 million and a student who has bought over $2m. Clearly, they’re acting falsely, as criminals. Control over foreign currency operations aims to tackle such criminal activity.

MT’S REFERENCE:

The World Bank’s 2015 Doing Business Report states that Belarus has advanced by 47 positions over the past year, in the ‘Taxation’ section: jumping from 107th to 60th place, among 185 countries
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