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Russia’s Federal Tax Service to establish new inspectorate for the country’s wealthy citizens

Source: VTimes

The Federal Taxation Service (FNS) is set to create a special inspectorate to work with wealthy Russians, reports the business outlet VTimes citing two unnamed federal officials.

The new tax inspectorate’s employees will deal with people whose incomes exceed 500 million rubles a year (about $6.6 million). However, the threshold is expected to be flexible: people with lower incomes will also be able to register with the new office.

The prospect of creating a special inspectorate for the rich has been under discussion at the FNS for some time. Though the regional tax authorities are currently responsible for oversight of wealthy residents, sources close to the FNS say that they often lack the information they need to do their jobs. Assessing the taxes that the wealthy owe requires an understanding of which companies, including foreign ones, are providing them with income. As such, the new inspectorate will be charged with compiling dossiers on Russia’s wealthy citizens — in part through the exchange of financial information with other countries.

According to Roman Isakov, a senior tax lawyer at UFG Wealth Management, centralizing data on wealthy people will strengthen the monitoring of their incomes. And the business community is suspicious of the FNS’s plans. “Of course, these are huge risks, money loves silence and everyone is calmer when revenue is verified by ordinary inspectors, and not by trained specialists,” an unnamed chairman of a large Russian company told VTimes. 

The Russian tax authorities have already learned about approximately 700,000 financial accounts abroad belonging to taxable Russian residents, with a total sum of more than 13 trillion rubles [approximately $172 billion], said FNS deputy head Dmitry Volvach. Now, even if such data gets to district inspectorates, their inspectors don’t always know what to do with it, the tax official complains.

VTimes

In June 2020, Vladimir Putin announced plans to increase personal income tax for Russian citizens who earn more than 5 million rubles per year (about $66,000) from 13 percent to 15 percent as of January 1, 2021. He promised that the additional revenue from this reform (estimated at up to $793 million per year) would be used to fund treatment for children with rare diseases. Putin signed the increase in personal income tax into law in November 2020.

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