Russian Parliament Approves Progressive Tax Bill to Replace Flat-Rate Tax

Russia's parliament has approved a new bill introducing a progressive tax on personal and corporate income to increase revenue during the Ukraine conflict. The bill replaces the flat-rate tax system implemented in 2001 and is expected to reduce reliance on oil revenue. It awaits President Putin's signature to become law.

Russia's parliament on Wednesday approved a significant bill aiming to increase income taxes for the wealthy. The move is intended to bolster government coffers amid ongoing conflict in Ukraine.

The bill passed its third and final reading in the State Duma and received rapid approval from the Federation Council. It now awaits President Vladimir Putin's signature to be enacted into law.

This progressive tax measure marks a departure from the 2001 flat-rate tax, crediting its success in revenue collection. The new law imposes a 13% tax rate on incomes up to 2.4 million rubles (USD 27,500) annually, escalating to a maximum of 22% for incomes above 50 million rubles (USD 573,000).

According to Chris Weafer, CEO of Macro-Advisory consultancy, the tax hike is part of a broader government strategy to reduce dependence on oil revenues amid Western sanctions.

President Putin stated that the tax adjustment would impact only 3.2% of Russia's taxpayers. Additionally, the bill proposes increasing corporate income tax from 20% to 25%. The reform aims to raise 2.6 trillion rubles (USD 29 billion) in federal revenues by 2025.

(With inputs from agencies.)