11/7 Tass 290
GORKI, July 11 (Itar-Tass) —— President Dmitry Medvedev said insurance premiums can be cut from the current 30 percent to no less than 20 percent for the time being.
“Certain decisions regarding insurance premiums have been made. They may not be as radical as one would like, but they were not easy for the state and the budget. This is the maximum we can afford now, considering the state of the budget and the economy,” the president said at a meeting with entrepreneurs on Monday, July 11.
In 2010, the unified social tax was replaced with insurance premiums that were increased from 26 percent to 34 percent of the employer’s payroll fund. They are paid from salaries under 463,000 roubles.
However, on March 30, 2011, Medvedev instructed the government to reduce insurance premiums from January 1, 2012. “The burden of costs for higher pensions and healthcare is not the best solution, but there are no ideal solutions,” Medvedev said.
He believes that “the premium rate of 34 percent may be exorbitantly high”.
According to the president, a new rate should be “within the range close to the previous ones”.
The government has submitted two options after the president’s order given in Magnitogorsk in May. “The first option is to keep the rate of 34 percent only for big business and reduce current rates for small manufacturing and social businesses (to 16-20 percent), and to a level close to 26 percent for medium-sized business,” Russian presidential aide Arkady Dvorkovich said earlier this month.
“The second option is to reduce the maximum rate to 30 percent, and that for small manufacturing and social businesses from 26 percent [to 16-20 percent],” he said, adding that the first option would have priority.
He said that the decision to be made would be effective for two years.
Speaking of how to make up for a shortfall in revenues from these cuts, Dvorkovich said there are several possibilities. “All options have been presented, they have their good and bad sides, but it is obvious that the rate will be cut for the overwhelming majority of businesses. As for compensation [for the shortfall], we may use some of the money from the National Welfare Fund or change the regressive [tax] scale or increase some other taxes”, the aide said, adding that the latter solution was “not the best one”.
He noted that the second option would be effected if the first one is not perfect and cannot be administered properly.
Ideally, the social tax rate should go back to the previous level, Russian presidential aide Arkady Dvorkovich said earlier. “We have set such a task, but there is no set of measures” to fulfil it, he admitted.
In his opinion, a higher social tax rate may be unacceptable for many enterprises and may force them to opt for shadow operations.
Dvorkovich cited projections indicating that the budget may lose 700-800 billion roubles because of that.
However he believes that the lowering of the social tax may help to reduce these losses.
Prime Minister Vladimir Putin said the government would seek ways to reduce taxes on business while continuing to meet social standards.
He recalled last year’s decision to start a large-scale healthcare modernisation programme. “It was a difficult decision. And above all for businesses which had just begun to recover after the crisis. After all, 460 billion roubles for medical programs do not come out of thin air. We actually took them out of the economy,” Putin stated.
He agreed that “enterprises and companies should have more resources for development”.
“Increasing the tax burden on the economy is not always the best solution,” the prime minister said.
Putin said the government would be “looking for ways to reduce the fiscal burden on premium rates. We should not apply simple, linear solutions, shifting the problem from businesses onto the shoulders of ordinary citizens. Because we cannot and must not deviate from the social standards. We cannot follow the path of some of countries that have done so,” he stressed.
Putin instructed the Finance Ministry and the Ministry of Economic Development to present concrete mechanisms and parameters for cutting insurance premium rates from January 1, 2012.