Russian taxation system

                                             Russian taxation system

Russia's tax system has historically been confusing and  inefficient, because businesses and individuals routinely failed to pay their taxes on time or even at all. The government's need for money to pay pensions and salaries fueled a proliferation of taxes, including a tax on people crossing Russia's borders, additional levies on freight, new transit fees, and a tax on yields from government securities.

Today the primary tax law for the Russian Federation is the Tax Code, that regulates relationships among taxpayers, tax agents, tax-collecting authorities and legislators and  defines specific rates, payment schedules and detailed procedures for tax calculations. It was enacted in 1998 with a few additions in 1999, like the new corporate profit tax section and the new simplified tax system for small business.

As Russia is a federal state with a rather high degree of centralization, taxes are divided in 3 major groups: federal, regional and local taxes. Federal taxes, which include VAT (Value Added Tax - 18%), profits tax (20%), customs duty and UST (Unified Social Tax), are set at the federal level and cannot be changed, whereas regional and local taxes - by the state governments. Collection of taxes is split between the amounts allocated regionally or to the centre as well. All taxes must conform to the framework established by the Code, which is designed as a complete national system, but excludes customs tariffs.

A decade ago the majority of the population had a little awareness of taxation, but nowadays the Russian federation has a firmly-rooted system that impacts every citizen. Modern Russian tax system tends to use regressive tax rates, that are highly centralized for a federal state and appear to be very oil- and gas- rates dependant, which is the reason why they, unlike regular taxes, are set not by the Tax Code but by government decree. As a result, these taxes affect spending patterns and choices of the people which is reflected in the percentage of their incomes allocated to specific goods and services.

To sum up, there is still a lot to be done in the area of tax policy in Russia, due to the occurrence of a lot of disadvantages, such as complexity, a plenty of various privileges for a certain pro-governmental business structures, which do not stimulate economic growth and some other complications, which demand the process of seeking ways to satisfy immediate budgetary needs and to strengthen the perception of the tax system .