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To improve taxation, Russia needs to shift accent from labor income to indirect taxes, Mr Vitor Gaspar, director of the Fiscal Department at the International Monetary Fund, told Armenia News – NEWS.am at the IMF/World Bank 2017 Spring meetings in Washington DC.

Russian consumers’ income and behavior is important to Armenian exporters, as they are by far the largest outside customers of Armenian food and drinks (brandy, fresh and canned fruit and vegetables, farmed fish) and garments.

Russia has greatly improved the structure end efficiency of taxation and tax collection. Tax bases have been broadened, rates cut, and compliance improved, Mr Gaspar said. 

Nonetheless, further reforms are needed such as: a) improving taxation of rents from natural resource extraction; b) shifting taxation from labor income to indirect taxes; c) increasing overall progressivity and lastly d) reduce tax expenditures. The authorities are discussing potential future changes to the taxation system, it remains to be seen what changes will come from these efforts, the IMF official added.

Tax collection has also been improved by means of excise tax. Such moves have been made in 2016, effective from 2017. They largely affected oil products and tobacco, and, to a smaller extent, strong alcoholic drinks, including brandy.

Speaking on this, Gaspar said that excise tax is a good tool in today’s environment, as it will have little side effect on growth, due to its low fiscal multipliers (production and consumption of excisable products have relatively loose ties to taxation).

“It is too early, however, to assess if there is room for new rate hikes. The yields and permanency of the recent ones are yet to be seen”, Mr Gaspar said.

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