It is one of the lowest income taxes in the world. By comparison, Hong Kong has its income tax rates capped at 16 percent, while most countries in Western Europe have income taxes of 30 percent and more. The government's stated goal is to boost collection by encouraging evaders to file and to declare their full incomes by scrapping the current three-tiered tax system. Income tax accounts for a mere 15 percent of the state's revenues, compared to some 85 percent in the United States and some 50 percent in Western Europe. A flat 13 percent tax can be viewed as a kind of amnesty that will allow capital to return to Russia or come out of the shadow economy, Shatalov told the Duma.
Labor unions plan to stage protests against the measure which they say favors the rich.
Furthermore, an average taxpayer could find himself out of pocket thanks to the government's tax plans - which call for major hikes in gasoline excise and other sales taxes in order to fund cuts in income and turnover taxes. Many products are taken to outdoor markets and small shops by car. With the planned six-fold increase in gasoline tax set to boost fuel prices by 30 percent, there is likely to be a ripple effect on the prices of consumer goods. The problems do not end there. With the new 13 percent flat rate, tax evasion actually becomes easier, says Andrei Isayev, union activist and deputy head of the Duma's committee on labor.