Middle Class Tax Didn't Work

Real personal income in Russia from May 2010 to May 2011 has plummeted by 7%. Income of households did not fall that much even at the depth of the financial crisis of 2008 – 2009. In 2007, the year before the financial panic of 2008, income adjusted for inflation rose by 10.4%. In 2008 it went up by 2.7% and in 2009 – by 2.3%. Even last year the personal income outpaced inflation.

So, what happened in 2011? This magazine believes that the answer is the taxation of salaries. In 2011 taxes on payroll, national insurance contributions, were raised by a third. The peculiarity of Russian taxation is that only the first app. $16,500 or 135% of an average salary are taxable. In effect, the payroll tax is tax on middle class.

Whether raising taxes was not a good idea - taxes in Russia, despite all the moaning of business community, are among the lowest in Europe - or doing it in such a demonstratively unjust manner was outright stupid is a matter of a debate. What is clear is that it did not work.