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Government supports draft law of easier social taxes for individual entrepreneurs

Yesterday, the government unveiled its positive conclusion on the draft law delivered to the Duma by the Unified People’s Front in mid-April concerning the social tax for individual entrepreneurs. According to this draft law, the social tax rate for individual entrepreneurs with an annual revenue below RUB 300,000 is to be cut by half, from the current level to the amount of one annual minimum statutory monthly wage, thus returning it to the level it was before the increase at the beginning of this year. For individual entrepreneurs with an annual revenue of above RUB 300,000, the social tax will be in the amount of one annual minimum statutory monthly wage plus 1% from any sums earned above RUB 300,000.

This step shows that the government is still looking for balanced measures regarding the pension system in Russia. In our view, the discussion has been triggered by concerns about the slowdown in the economy. However, these changes are not a surprise as President Putin mentioned them during his 11th annual live TV phone in with the Russian population on 25 April.

Once enacted, we might see a positive outcome for the economy, mostly as a result of the shadow part of SME businesses turning legal, although it would be marginal. We believe that the authorities need to take more decisive measures to stimulate economic growth. 

Maxim Oreshkin, Daria Isakova
VTB Capital analyst

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