Government intends to lower single social tax

The government intends to reduce the efficient single social tax (SST) rate by 5 percentage points, First Deputy Finance Minister Sergey Shatalov declared today. According to him, options for changing the SST rate have not been defined at today's Cabinet meeting. However, the government is ready to make a more radical move and to decrease the income level from which a discounted rate becomes applicable from RUR100,000 ($3,141) to RUR50,000 ($1,570). The top level of the SST rate scale will be set at RUR1m ($31,407).

According to Shatalov, estimations by the Economic Development Ministry have shown that in the event of changes in the SST rate, the budget will lose RUR176bn ($5.53bn) according to the worst scenario, and in accordance with the best scenario (envisaging legalization of wages), the amount of losses will reach RUR100bn-130bn ($3.14bn-$4.08bn). The deputy minister pointed out that Prime Minister Mikhail Kasyanov had suggested that the decision on the SST should not be postponed until next year. At the same time the government should consider the possibility of using the financial reserve for compensation for possible risks.

A bill on changes in the SST will be prepared before February 27, and the exact date of the introduction of discounted SST rates will be set in April, Shatalov stated.