The Flat Tax at Work in Russia: Year Six, 2006

Thursday, December 13, 2007

The Federal Treasury of the Russian Federation has compiled the data for total taxes and revenues for the consolidated federal and regional budgets for 2006. The data show that the 13% flat tax on personal income continues to achieve very positive results.

In 2006, the Treasury collected 930.4 billion rubles ($1=RUB24.4) in personal income tax receipts, a nominal increase of 31.6% over the 707 billion rubles in 2005. After adjusting for annualized consumer price inflation of 9.0% in 2006, real personal income tax revenue rose 22.6% in 2006. Total real ruble revenue has more than tripled in the six years since the 13% flat tax was implemented on January 1, 2001. It should be recalled that the top marginal rate in 2000 was 30% before the implementation of the 13% flat tax. The low flat rate has contributed to the decline in capital flight, improved taxpayer compliance, and increased revenue.

The 13% flat tax has become a stable feature of Russia’s tax system. With the rise in real incomes percolating through the economy, receipts continue to grow at a healthy clip.