State Duma adopted law on the abolition of income tax on interest on deposits in 2021–2022. Details, perspectives and expert opinions are in the Izvestia article.
In 2021, Russia introduced an income tax on interest on deposits over 1 million rubles. They are subject to income exceeding 42.5 thousand rubles, which is calculated from the key rate, which at the time of the adoption of the law was 4.25%. This year, the tax had to be withheld from amounts over 85 thousand rubles (with a key rate of 8.5%).
According to the adopted law, citizens who have received income in excess of tax-free income are exempt from paying personal income tax on interest received in 2021-2022.
The principle of calculating the taxable amount has also changed. Now this is not the key rate of the Central Bank at the beginning of the year, but the maximum rate of the Central Bank during the year. Thus, in the future, the amount of tax will be less than under the old accrual mechanism.
In addition, from now on gifts and assistance for veterans of the Great Patriotic War, former prisoners of concentration camps and some other categories of citizens are not subject to personal income tax.
The tax system is “progressing”
Exemption from paying personal income tax on interest on deposits is designed to protect the savings of citizens and prevent a sharp increase in the tax burdensays Vladimir Gromov, PhD in Economics, Senior Researcher at the Tax Policy Research Laboratory of the IPEI RANEPA.
– Banks have significantly increased the yield on deposits, and due to the peculiarities of calculating personal income tax and against the background of existing realities, citizens who opened deposits in banks for an amount that is much less than 1 million rubles could fall under the taxation of deposit interest.
According to the expert, exemption from personal income tax is a temporary measure.
— The state softens tax conditions, promptly responding to changes in the economic situation, but the very idea of taxing interest income remains, as it is associated with the growth of the “progressiveness” of the Russian tax system, Gromov notes.
The analyst considers other measures to support low-income groups to be appropriate.
“It is advisable to index the standard tax deductions for the income of low-income groups of the population, as well as fix the upper limit of the exchange rate at which income from the sale and redemption of securities will be converted into rubles for tax purposes,” he suggests.
Work in the complex
Tax support is more effective than “scattering money from a helicopter”, as it has a longer-term effect, says Ekaterina Kosareva, managing partner of the analytical agency WMT Consult.
— Tax incentives are the most effective in the economy. The law is a logical continuation of the steps on tax breaks: for example, the cadastral value of real estate is fixed at the level of January 1, 2022, the freeze is valid for a year. The benefits also apply to businesses. Thus, 0% VAT is set for the hotel business. Budget losses will be “recouped” a hundredfold by creating jobs and registering new enterprises, including those working for import substitution.
According to the analyst, it is necessary to further develop measures of tax support for the population.
— The announced and approved measures are not enough for the current conditions. Another contender for a temporary cancellation or freeze is an increased tax for those who earn more than 5 million rubles a year. As a rule, these are entrepreneurs, a thin layer of the middle class, which is catastrophically small in Russia. It is known that many successful entrepreneurs express a desire to emigrate against the backdrop of geopolitical events. Therefore, mechanisms should be developed that will leave valuable personnel in the country, – Ekaterina Kosareva sums up.
All for liquidity
The law is aimed primarily at maintaining bank liquidity, says Artem Tuzov, executive director of the capital market department at IC UNIVER Capital.
– Deposits in rubles are becoming one of the most profitable investments for citizens, given that deposits are insured by the DIA.
At the same time, the expert says it is difficult to estimate the loss of the budget, since the tax was never collected. According to the interlocutor of Izvestia, the abolition of personal income tax on interest received from more than 1 million rubles will give banks an advantage over other options for investing money and will allow maintaining liquidity at a high level.
“So far, the tax has been canceled until the end of 2022,” Tuzov continues. – Then they will look at the situation in the banking sector. It is likely that the tax collection will be postponed for 2023 as well.
The analyst is inclined to believe that measures are needed to stimulate the new Russian economy, “since the Russian market has closed off from foreign investors.”
Save money in the system
This measure is primarily designed to prevent a sharp outflow of ruble deposits from bankssays financial expert, co-founder of the school of independent financial consultants Finliberty Svetlana Samoilova.
– There were problems in the country’s financial system due to sanctions from the West. The Central Bank of the Russian Federation has already admitted that it will be able to replenish the liquidity of the banking system at the expense of reserves. But apparently this is not enough. If Russians massively start withdrawing money from their deposits, this may become an additional negative factor for the stability of banks. The abolition of personal income tax on deposits over 1 million rubles should encourage citizens to keep their funds on deposits further.
According to the expert, it is difficult to estimate what amount of taxes the budget will receive less in this case.
– But, apparently, such a loss is assessed as insignificant compared to the consequences of a massive withdrawal of money from deposits. This is a measure to stabilize the deposit market and for the stability of the overall financial system, Samoilova comments.
It is impossible to determine the amount of funds that the Federal Tax Service should have raised, explains Yaroslav Kabakov, director of strategy at IC Finam.
— The tax calculation campaign was scheduled for the end of spring, and the distribution of notifications to citizens was scheduled for the fall. Thus, this measure is aimed primarily at keeping depositors’ funds in bank accounts; in the current conditions, interest income tax at the end of 2022 would have to be paid on interest income above 85 thousand rubles (as of January 1, 2022, the rate of the Central Bank of the Russian Federation was 8.5%). Given that the key rate is now 20%, many citizens have tried to shift to other financial instruments.
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