The decision to tax income on deposits of more than 1 million roubles has to be considered in the context of a set of changes in tax regulation and in currency regulation.
Thus, for example, the result of the large-scale deoffshorisation programme, launched in order to bring capital back to the Russian Federation, appears to be a move away from foreign jurisdictions that had attracted people by the chance to apply reduced tax rates and, in consequence, the repatriation of the income received and the redirection of flows of money to the domestic market.
The growth of the money supply inside the borders of the Russian Federation is also encouraged by BEPS, a set of measures against the erosion of the tax base and the shifting of profits, initiated by the OECD around the world. Under that programme many of our compatriots have run into difficulty not only in using the preferences granted by double tax treaties, but also in keeping funds placed on deposit abroad.
The reason is that banks are now obliged to investigate the beneficial owners of capital and the sources from which it was formed. If the slightest doubt arises, the bank stops servicing the client, which means that the depositor has to withdraw the funds or reallocate them.
The changes set out above, which are already an accomplished fact, objectively create the conditions for substantial capital to return to, or to arise on, the territory of the Russian Federation. That capital may be used in one of the following ways:
- investment (including reinvestment in one's own business);
- an increase in demand and, accordingly, a stimulus to supply;
- placement on deposit.
For any economy the first two are positive, stimulating factors, whereas the accumulation of substantial sums on deposit brings no benefit in a global sense and also feeds inflation. In those circumstances, taxing excessive sums placed on deposit looks an entirely logical decision, aimed at developing the economy and forming part of the deoffshorisation programme, the implementation of which began quite some time ago. Accordingly, the decision to tax income from deposits was not taken now, and was certainly not taken under the influence of the coronavirus. It is a measure to stimulate the economy that was planned long ago and that is, which matters no less, a necessary one.
In our view, and in the light of what has been said, it should be recognised that the principal aim is not that the state should receive additional revenue for the budget, but that the public should be encouraged to invest in the development of business which, by multiplying what has been invested in the course of entrepreneurial activity, will in its turn secure a substantial growth of taxes. By investment we mean both reinvestment in one's own business and investment in the securities markets, including individual investment accounts. The reliefs and preferences granted to private investors are further confirmation of this rationale for taxing income from deposits.
- Sergei Pivovarchik, managing partner of Consul Group.
It should also be noted that the bill as it stands today (and it may, of course, still change in the course of the readings) provides for tax only on the amounts that exceed the return at the key rate. For example, at a key rate of 6% and a deposit of 1 million roubles, personal income tax will be charged on amounts exceeding 60 thousand roubles (6% of the amount of the deposit).
In those circumstances there is no basis for speaking of substantial receipts from the deposits of broad sections of the public. The changes will be aimed, first of all, at encouraging the most affluent citizens to move their savings out of the banks and into real business.
Sergei Pivovarchik, managing partner of Consul Group
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