Business promised epidemic phony companies in response to new taxes

Russian Union of Industrialists and Entrepreneurs (RSPP) tried to imagine what will happen to the economy if recent proposals will be approved by the Ministry of Finance to increase the tax burden. Picture turned joyless - increasing revenues from some taxes will be offset by lower contributions from others. The state risks a whole bunch of trouble: inflation, disinvestment and epidemic phony companies.

RSPP Materials (there RBC) were sent to the Ministry of Finance, Office of the businessman knows the RSPP board, an official response from the Ministry of Finance is not obtained, he adds. Document is a succinct summary of a survey of entrepreneurs. Number of participants in the survey did not disclose the RSPP, indicating only that it is a union member.

Businessmen asked how business impact discussed at the White House in 2018 after an increase of VAT and income tax by 2 percentage points - up to 15 and 20%, respectively, as well as conceptually approved by the government in 2015, the introduction of a sales tax of 3% and the abolition upper threshold contributions to the Fund of obligatory medical insurance. According to Finance Ministry estimates, only the last two initiatives will further the state about 400 billion rubles

None of the Finance Ministry’s proposal does not find support among entrepreneurs. Be prepared for the fact that the company will cut production and investment part of the business will go to the “shadow”, and the practice of using phony companies spread, warns RSPP. For the economy, it is fraught with rising inflation, reduced employment and, consequently kK increase social tensions.

This is too high a price, the payment of which, the state does not guarantee a solution to their problems. For example, if the personal income tax will increase 13 to 15%, the company may decide not to index the wages of workers, and then it would lead to “a reduction in living standards, reducing purchasing power … as a result - to inhibit economic activity.” Or they will increase the cost of labor, thereby reducing profitability. In both cases, admission to the budget of income tax may be reduced.

The same effect is possible by increasing VAT to 20%. The line of reasoning is that - tax increase will reduce the competitiveness of Russian goods, as a result, reduce the volume of production and the tax base for profit. For the timely payment of taxes and additional funds are needed as a result - a reduction in working capital. Companies will cut investment program.

25 July 2014

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