Lower tax rates are not a solution to all Russia’s problems, but tax policy is moving in the right direction. Tax-news.com reports that the government wants to reduce the corporate tax rate to 20 percent. Even more impressive, policy makers seemingly understand that lower corporate tax rates will have a larger supply-side effect than a reduction in the value-added tax, demonstrating a better grasp of economics than nine-tenths of the US Congress. The story also notes that Russia has taken other positive steps, though it does not mention the 13 percent flat tax implemented in 2001:
Russia may cut its corporate profit tax rate to 20% from 24% as part of a three-year tax policy plan, Deputy Finance Minister Sergei Shatalov stated last week. The government had previously been considering a further reduction in value added tax, currently 18%, to as low as 13%, but Shatalov said that a cut in corporate profit tax would be more likely to stimulate economic growth and boost levels of investment. …Putin has stated many times that while the government remains committed both to simplifying tax legislation and reducing the tax burden, tax reform must be balanced against needs of business, which requires certainty in the tax code. Since 2002, the Putin administration has reduced or abolished a number of taxes, including turnover tax, payroll taxes, sales tax, and value added tax. According to Putin, in 2005 Russia’s tax burden eased to 27.4% of GDP, from 28.7% in 2004.