The Economic Development and Trade Ministry has proposed reducing the taxes on activities and increasing the taxes on consumption and real estate in the mid-term range, Economic Development and Trade Minister Elvira Nabiullina said at the government hour meeting in the State Duma on February 22.

“Generally, my position is that, if we are talking about the adjustment of the entire tax system to the development and the fulfillment of a stimulating function in the mid-term and in the long term, we should reduce the taxes on activities and increase taxes on expenditures, consumption, real estate, and property,” she said, commenting on how the social insurance payments can be adjusted and on the proposed changes to the tax system in general.

Nabiullina said it is now too early to say how the increase in insurance payments has affected businesses, as there are no statistics. “However, we see it as a risk zone because the economy and enterprises will react to such increases in insurance payments,” the Minister said.

Some of the compensation measures have already been adopted, Nabiullina recalled. “However, we, of course, believe that it is not enough, and we are now working on measures that could change this system and make it possible to change the calculation of insurance payments, realizing that we have obligations to the pension system,” the Minister said.

Among the measures that are now being considered is “an increase of excise duties on alcohol, tobacco, and real estate taxation.”

This work has not been completed yet and is being done in consultations with businesses, primarily small and mid-sized businesses in the processing sectors, for which such an increase was highly sensitive. Responding to a question from the legislators as to whether it would be expedient to introduce a progressive taxation scale on the incomes of private individuals, Nabiullina said: “I don’t think it is expedient to introduce the progressive scale now.”

“According to our estimations, the effect from a flat and low income scale was positive. That decision stimulated companies to take wages out of the shadow. We are currently concerned that a different decision may drive them into the shadow,” the minister said.