the amounts for inflation.<sup>34</sup> The amounts of benefits financed from the Regional Budgets are indexed according to the regional laws which vary a lot.

**Table A-1. Programs simulated in RUSMOD, 2017**

|**Employer social insurance contributions**|
|---|

Computed only for formal sector workers. Social insurance contributions (SIC) are paid by employers on behalf of employees to cover the costs of mandatory social insurance-based allowances, public pensions and health care. Contributions rates are set by federal laws. Social contributions apply to the withholding personal income tax base (namely, gross earnings). For pension contributions the annual employment income below 876,000 rubles is taxed at 22% rate, while income above this amount is taxed at 10%.<sup>35</sup> The rate of social insurance contributions is 2.9% and the amount exceeding 755,000 rubles is exempt. The rate for health care contributions is 5.1%, and there is no upper limit for annual <u>income.</u>

**<u>Self-employed social insurance contributions</u>**

Computed only for formal sector workers. The size of contributions for the self-employed is determined as the minimum wage times the SIC rate. The minimum wage is 7,500 rubles per month. The self-employed are obliged to pay only pension and health insurance contributions, participation in other social insurance programs is voluntary. The rate of pension contributions is 26%. The amount exceeding 300,000 rubles is taxed at 1% rate. The total contributions should <u>not exceed 8 times the minimum wage multiplied by the 26% rate. The rate for health care contributions is 5.1%.</u> **<u>Personal Income Tax</u>** Computed only for formal sector workers. A unified tax rate of 13% applies to main income (work for pay, contractor's agreements, housing lease). Public pensions and allowances are not taxable. Capital gains from asset sales are taxable only if the seller owned the asset for less than three years. A higher tax rate of 35% applies to some sources of income, such as bank interests that exceed some interest rate limit (which is typically non-binding). Dividends are subject to a 9% tax. The model differentiates between withholding income tax and final income tax. The former is the amount withheld by the employer as partial payment of employee’s income tax. For the latter the liability is based on the final tax report submitted at the end of each tax year (in April). There are non-refundable standard tax allowances that are used to reduce the withholding income tax base and there are non-refundable social tax allowances that reduce the final income tax base (the latter are related to expenses on charity, education and health care). The tax liability for the self-employed is simulated in <u>the same way.</u> **-** **<u>Lump sum benefit for childbirth/placement of a child into family</u>** A federal lump-sum allowance of 16,350 rubles paid to families for each newborn or adopted child. Some regions set <u>additional payments on top of that.</u> **<u>Maternity leave allowance</u>** The allowance is paid only to socially insured women for the period of 140 days (70 days preceding the childbirth and 70 days after; or for 194 days in case of two or more children). Women are eligible if their contribution record is no less than 6 months. The amount is 100% of average monthly earnings net of withholding income tax, subject to an annual upper limit established annually by the Social Insurance Fund (248,164 rubles/343,884 rubles in case of two or more children). The average monthly earnings are calculated taking into account earnings over the two years preceding the <u>maternity leave.</u> **<u>Allowance for women who have registered in health care institutions by the 12th week of pregnancy</u>** - <u>A lump sum allowance equal to 613.4 rubles.</u> **<u>Childcare allowance up to 1.5 years</u>** There are two types of this allowance. Contributory allowance is available to socially insured mothers (employed for at least 6 months) and is proportional to mother’s average net earnings over the past two years preceding the childcare leave. The monthly amount equals 40% of net earnings with an upper limit of 23,120 rubles. The minimum amounts are 3,066 rubles for the first child and 6,131 rubles for the second and subsequent children. Non-contributory allowance is provided to women without a contribution record. The monthly amount equals to the minimum amounts shown above. A mother may remain on childcare leave up to three years, however, after 1.5 years they are only eligible for a monthly <u>compensation of 50 rubles (this amount might be topped up from the regional budget, but few regions do so).</u> **<u>Maternity capital</u>** This is a lump-sum payment (453,026 rubles) granted to each woman who gave birth or adopted the second (third and consequent) child. Each mother is entitled irrespectively of the date of a birth of the first child, but only once. Mothers are 34 However, in 2013-14 the coefficient was higher than inflation, while in 2015-16, due to fiscal consolidation, the amounts were “frozen” for the majority of benefits.

35 The average ruble exchange rate was 60.9 rubles per U.S. dollar in 2015 (RLMS survey year), and 58.7 rubles per U.S. dollar in 2017Q1 (RUSMOD calibration). The 2011 PPP conversion factor is 23.4.

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