Even those people who are not interested in business are not indifferent to a tax system. Especially it applies to taxation of income. Therefore the Ministry of Finance initiative to change the rate of income tax the following year is one of the most popular.Ministry of Finance’s offer exactly can be called revolutionary. This day Belarusian citizens pay income tax on a progressive scale. Allocations rate can be 9, 15, 20, 25 or 30 percents depending on the amount of income within a year. Till recently it was considered as fair in the Government. “Who earns more must pay over more”, this formula seemed to meet perfectly the principles of socially oriented economy. Herewith there was an argument in favor of the scale: despite high marginal rate Belarusian taxpayers on the average pay over 11 interest rate of their income. Officially this index number is even lesser than the Russian one where 13 interest rate gamut is known to be for some years.
Why does Ministry of Finance offer to introduce a flat rate of tax — 12 percents?
The case is that a number of experts point at grave faults of the progressive system. This day these faults slow down the development of the economy. The chairman of Belarusian entrepreneurs’ union Alexander Kalinin noted: “In Belarus a lot of most qualified specialists and entrepreneurs pay over a 30 percents’ tax. It is considered to be high. And this puts them on recording their own business or seeking employment in neighboring Russia where rate of income tax irrespective of the amount of income is 13 percent. The alternative is to conceal your income and pay wages in “an envelope”. But is the Government interested in motivating the “shadow” economy?
Minister of Finance Andrey Kharkovets considers 12 percents’ scale to be assistant with solution of such problems. It is offered to ratchet upward personal exemption so that least well-to-do citizens don’t suffer. As a result, according to the Ministry of Finance, the following year there may be about extra 600 billion rubles (about 285 million of US Dollars) at population’s disposal due to conversion to 12 percents scale. Taxation of income in Belarus will become even more loyal than in Russia. A concomitant advantage is the simplification of accounting records maintenance due to the introduction of a single rate. The complexity and unwieldiness of taxation system quite often attracted criticism. At present the Ministry of Finance advances the initiative to simplify tax administration.
In particular, since the following year it is planned to introduce a single sales tax and a single service tax. Today maximum rate service tax is 10 percent. Retail sales tax depends on the origin of goods. The payment transaction from Belarusian and Russian goods is calculated at the rate of 5 percents. From the goods from third countries — at the rate of 15 percents. In 2009 single sales and service tax of 15 interest rate is to be introduced. A country of origin of goods will not be of importance. Apart from simplification of business accounting, it shall provide equal competitive conditions at the market for all manufacturers.
According to Andrey Kharkovets, in the near future 20 payment transactions are supposed to be abolished. Whereafter there will be only 27 payment transactions, 20 of them are regular payments.
Apart from simplification of document control, the Government is going to cut down the tax burden level. In many experts’ opinion tax burden on business is very high. More than 50 percents of GDP is redistributed through budget and public funds. However, the Ministry of Taxation dramatizes this figure. Deputy minister of Taxation Larisa Kondratova said that not only taxes influence the index number of assets centralism, but also such factors as budget revenue export duty on oil. “This duty comes up. But is it right to say that this leads to the tax burden increase on enterprises? In fact, international oil customers pay over this duty. At the meeting of representatives of the Government and business that has recently been held in Minsk managers of business alliances noted that tax burden on Belarusian enterprises really gradually runs down.
Revocation of interest payment of 1 percent from revenue into the road fund the beginning of the year became especially appreciable. By the way, the same tax was practiced in Russia. There it existed for a longer time than other turnover payments. The Russian Government abolished it in 2002.
In Belarus it is intended to give up the unpopular payments from revenue on the model of Russia. Andrey Kharkovets said that by 2010 there will not be any turnover taxes. For this purpose from the beginning of the following year employee insurance taxes will be reduced from 2 to 1 percent, and in 2010 they will be fully abolished. This allows to leave more than 2 trillion of Belarusian rubles (about one billion of US Dollars) at enterprise disposal.
The quality of Belarusian tax legislation must meet the best European standards. This will raise effectiveness of Belarusian economy, make it more attractive for foreign investors. To become one of the countries with best business-climate — and that is the task the Belarusian president Alexander Lukashenko set for the Government — is hardly possible without the improvement of the current tax system.
Vitaliy Volyanuk
