Income tax from individuals in the Republic of Belarus. What is personal income tax in Belarus? When income tax is not paid in Belarus

When calculating income tax on the income of foreign citizens, take into account the norms of international agreements on the avoidance of double taxation

Anna Pavlova, economist

Today, a foreign citizen receiving income from sources in the Republic of Belarus is no longer a rarity, but rather a practice.
Currently, many foreigners own real estate on the territory of the Republic of Belarus, which they subsequently either sell or lease, are founders of Belarusian organizations, work in the territory of the republic, give loans to Belarusian organizations, etc.
Income received by such citizens from Belarusian organizations is subject to income tax.
Therefore, today we will look at what kind of income of foreign citizens is subject to taxation and when, in relation to this income, the tax agent has the right to apply the rules of international agreements on the avoidance of double taxation.

International agreements take precedence over the norms of Belarusian tax legislation

Individuals, regardless of whether they are recognized as tax residents of the Republic of Belarus or not, are payers of income tax on income received from sources in Belarus (Article 152 of the Tax Code of the Republic of Belarus, hereinafter referred to as the Tax Code). The list of such income is defined in Art. 154 NK.

In turn, tax residents of the Republic of Belarus, incl. foreign citizens and stateless persons (hereinafter referred to as foreign citizens) must pay income tax in the republic on income received by them and from sources outside its borders.

For reference: Tax residents of the Republic of Belarus are recognized as individuals who actually stayed on the territory of the Republic of Belarus in a calendar year for more than 183 days. Individuals who were actually outside the territory of the Republic of Belarus for 183 days or more in a calendar year are not recognized as tax residents of the Republic of Belarus (Article 17 of the Tax Code).

At the same time, tax agents, when considering the issue of taxation of income received by foreign citizens from sources in the Republic of Belarus, must take into account the priority of international law in relation to the norms of Belarusian legislation. Thus, if the norms of international treaties of the Republic of Belarus establish norms other than those provided for by the Tax Code and other national legislative acts, then the norms of the international treaty should be applied, unless otherwise determined by the norms of international law (Article 5 of the Tax Code).

Important! If the Tax Code and (or) other legislative acts provide for more preferential tax conditions than those established by the international treaty of the Republic of Belarus, then the provisions of the Tax Code and (or) these acts should be applied.

This rule does not apply to international treaties of the Republic of Belarus regulating mutual trips of citizens, and international treaties of the Republic of Belarus forming the legal framework of the Customs Union.

Let us note that certain international treaties concluded by the Republic of Belarus with other foreign states provide for the taxation of a number of incomes in the country for which the recipient of the income is recognized as a resident (i.e., the country where the income was received does not matter).

In this article we will consider the application of international treaties on the avoidance of double taxation in relation to income received by foreign individuals, using the example of:

Agreement between the Government of the Republic of Belarus and the Government of the Russian Federation on the avoidance of double taxation and the prevention of tax evasion in relation to taxes on income and property dated 04/21/1995 (hereinafter referred to as the Agreement with the Russian Federation);

Agreement between the Government of the Republic of Belarus and the Government of the Republic of Lithuania on the avoidance of double taxation and the prevention of tax evasion in relation to income taxes dated 18.07.1995 (hereinafter referred to as the Agreement with Lithuania);

Agreement between the Government of the Republic of Belarus and the Government of Ukraine on the avoidance of double taxation and the prevention of tax evasion in relation to taxes on income and property dated December 24, 1993 (hereinafter referred to as the Agreement with Ukraine).

Income from the use of real estate

Income from the use of real estate can be taxed based on the location of the property, i.e. in the country in which such income was received. At the same time, the provisions of these international treaties do not establish marginal (restrictive) tax rates when taxing such income.

Example 1

A Belarusian organization and a Lithuanian citizen permanently residing on its territory entered into a lease agreement for an office building owned by this citizen, located on the territory of the Republic of Belarus.

Income received from sources in the Republic of Belarus includes income from rental (financial lease (leasing)) or from other use of property located on the territory of Belarus, including the cost of improving property that was in the use of other persons and returned to its owner (for except for cases when the improvement was a consequence of major repairs, the implementation of which was due to emergency circumstances (fire, accident, natural disaster, traffic accident and other similar circumstances, including force majeure)), - in the presence of documents confirming the fact of the occurrence of these events, the comparability of their consequences and the improvements made (subclause 1.4, clause 1, article 154 of the Tax Code).

Thus, income received by a Lithuanian citizen from leasing real estate located on the territory of Belarus is recognized as income received from sources in the Republic of Belarus.

Income received by an individual from real estate located in Belarus may be taxed in the Republic of Belarus (Article 6 of the Agreement with Lithuania).

Thus, a Belarusian organization that is a source of payment of income to a Lithuanian citizen must, in accordance with paragraphs. 8th and 9th Art. 175 NK:

1) withhold the calculated amount of tax directly from the payer’s income upon its actual payment;

2) transfer the tax to the budget no later than the day of actual receipt of cash from the bank for the payment of income in the form of wages per month and (or) the day of transfer of such income from the accounts of tax agents in the bank to the accounts of the payer or on his instructions to the accounts third parties in banks.

The income tax rate for an individual who is not recognized as a tax resident of the Republic of Belarus is 12% (clause 1 of Article 173 of the Tax Code).

For reference: similar rules are contained in agreements with the Russian Federation and Ukraine.

Dividends and interest

For such types of income as dividends and interest, agreements with the Russian Federation, Lithuania and Ukraine provide for the right to levy income tax both in the country of the source of income and in the country of permanent residence of the recipient of such income. However, this right is limited to the establishment of marginal tax rates at which such income is subject to taxation.

Example 2

In 2012, an agreement was concluded between a Russian citizen (resident of this country) and a Belarusian organization to provide the latter with a loan in the amount of 200 million rubles. for 1 year with payment of 50% per annum.

In June 2013, a Belarusian organization paid a loan amount of 200 million rubles to a Russian citizen. and interest for its use in the amount of 100 million rubles.

According to paragraph 2 of Art. 10 of the Agreement with the Russian Federation, interest arising in one contracting state (in this case, in the Republic of Belarus) and paid to a person with permanent residence in another contracting state (in this case, in the Russian Federation), may also be taxed in the contracting state in which they arise, and in accordance with the legislation of this state. However, if the recipient of the interest is actually entitled to it, the tax charged should not exceed 10% of its gross amount.

Income received from sources in the Republic of Belarus includes, in particular, dividends and interest received from a Belarusian organization (subclause 1.1, clause 1, article 154 of the Tax Code). Such income is recognized as income received from sources in Belarus, regardless of the place from which their payments were made.

Income received by payers in cash or in kind to repay obligations under a loan agreement without taking into account the interest provided for in such an agreement (subclause 2.20, clause 2, Article 153 of the Tax Code) is not recognized as subject to income tax.

Thus, the amount of interest for using the loan is 100 million rubles. is recognized as subject to income tax.

Since the interest was received from a Belarusian organization, it is recognized as income of a citizen of the Russian Federation received from sources in the Republic of Belarus, and accordingly may be subject to taxation in the republic. Taking into account the provisions of the Agreement with the Russian Federation, the tax amount should be calculated at a rate of 10%.

For reference: Similar rules and marginal tax rates on interest income are contained in agreements with Lithuania and Ukraine. In turn, for dividends the marginal tax rate is: 15% for the Russian Federation and Ukraine, 10% for Lithuania.

Income from the sale of property

Income from the sale of real estate may be taxed based on the location of the property, i.e. in the country in which such income was received. At the same time, the provisions of the international treaties under consideration do not establish marginal (restrictive) tax rates when taxing such income.

Example 3

A Belarusian organization acquires from a citizen of Ukraine (a resident of this country) a part of a building belonging to him, located in the Republic of Belarus.

Income received from sources in the Republic of Belarus includes income from the alienation of real estate, incl. an enterprise as a property complex (part of it) located on the territory of the Republic of Belarus (subclause 1.5.1, clause 1, article 154 of the Tax Code).

Since income was received by a citizen of Ukraine from the alienation of real estate located on the territory of the Republic of Belarus, they are recognized as income received from sources in the Republic of Belarus and, accordingly, may be subject to taxation in Belarus.

Income that a person with permanent residence in one contracting state (in this case, in Ukraine) receives from the sale of real estate located in another contracting state (in this case, in the Republic of Belarus) may be taxed in this other state (clause 1 Article 13 of the Agreement with Ukraine).

Taking into account the above, a Belarusian organization as a tax agent must calculate and withhold income tax from the income it pays to a citizen of Ukraine for the acquired building.

At the same time, she does not have the right to apply the benefit provided for in subsection in relation to the specified income. 1.33 clause 1 art. 163 of the Tax Code, since it applies only to income received by tax residents of the Republic of Belarus.

For reference: similar rules regarding income from the sale of real estate are contained in agreements with Lithuania and the Russian Federation.

Income from independent personal professional services

With respect to income from independent personal professional services, the international treaties in question, subject to certain conditions, provide the exclusive right of taxation to one of the contracting states. Moreover, the provisions of the international treaties under consideration do not establish maximum (restrictive) tax rates for taxation of such income.

Income from independent personal professional services, in particular, includes income received from the exercise of independent scientific, literary, artistic, sports, educational or teaching activities, as well as the independent activities of doctors, lawyers, engineers, architects, dentists and accountants.

Example 4

A Belarusian organization is planning to hold a concert of a Belarusian performer - an individual (resident of the Republic of Belarus), who is not an individual entrepreneur, in Lithuania. Payment of the fee to the performer will be made by a Belarusian organization.

Income received by an individual who is a resident of one contracting state (in this case, the Republic of Belarus) from the provision of professional services or other activities of an independent nature is taxable only in that contracting state. The exception is cases when this person has a permanent base in this other state (a permanent place regularly available to this person for the purposes of carrying out his activities) (Clause 1 of Article 14 of the Agreement with Lithuania).

Thus, income received in the form of royalties from independent artistic activities by citizens who are residents of the Republic of Belarus is subject to income tax on the territory of the Republic of Belarus. Accordingly, a Belarusian organization, when paying this fee to an individual, must calculate and withhold income tax from him.

For reference: a similar rule regarding income from independent personal professional services is contained in the Agreement with Ukraine.

The Agreement with the Russian Federation has an additional condition that allows such income to be taxed only in the individual’s country of residence: the income must be paid from sources in that country.

Income from employment

With regard to income from employment, the international treaties in question, subject to certain conditions, provide the exclusive right of taxation to one of the contracting states. At the same time, the provisions of the international treaties under consideration do not establish marginal (restrictive) tax rates when taxing such income.

Example 5

A Belarusian construction organization carries out construction work in the Russian Federation under a subcontract agreement through a permanent representative office opened in this country.

The wages of Belarusian workers are paid by the permanent representative office of the Belarusian organization in the Russian Federation.

The wages of employees of a representative office of a Belarusian organization who are residents of the Republic of Belarus are taxed in accordance with Art. 14 Agreements with the Russian Federation. It follows from it that remuneration received by a person with permanent residence in the Republic of Belarus in relation to employment is taxed in the Russian Federation if it is paid by a resident of the Russian Federation or a permanent representative office of a Belarusian organization in the Russian Federation.

At the same time, remuneration received by a citizen of the Republic of Belarus in relation to work for hire carried out in the Russian Federation is taxed in the Russian Federation in the manner and at the rates provided for persons with permanent residence in the Russian Federation, i.e. at a rate of 13%, from the date of commencement of employment in the Russian Federation, if the employment contract (contracts) provides for a period of work of at least 183 days (Protocol to the Agreement between the Government of the Republic of Belarus and the Government of the Russian Federation on the avoidance of double taxation and the prevention of tax evasion taxes regarding taxes on income and property dated 04/21/1995, signed 01/24/2006).

For reference: Similar rules regarding income from employment are contained in agreements with Ukraine and Lithuania.

Elimination of double taxation

As noted earlier, with respect to certain income, the international treaties in question do not grant the exclusive right of taxation to one of the contracting states, i.e. both states have the right to tax income. In this case, the state of residence is obliged to eliminate double taxation by the method established in the international treaty (by the method of exemption from income taxation or offset of the tax paid (withheld) in the country of source of payment of income against the tax payable in the country of residence).

Provided for in Art. 20 Agreement with the Russian Federation, art. 22 Agreement with Lithuania and Art. 22 of the Agreement with Ukraine, the method of eliminating double taxation is enshrined in Art. 182 NK.

Thus, in order for a payer - an individual to receive exemption from income tax or taxation at reduced tax rates, to receive tax deductions or tax benefits in accordance with the international treaty of the Republic of Belarus on taxation issues, he must submit to the tax agent or the tax authority at the place of registration in the manner and in the form established by the Ministry of Taxation*, confirmation that he is a resident of a foreign state with which there is an international treaty of the Republic of Belarus. The confirmation must be issued (certified) by a tax or other competent authority of a foreign state. Moreover, it can be presented to a tax agent or to a tax authority both before and after payment of income tax.

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* Instructions on the procedure for filling out tax returns (calculations) for personal income tax, confirmation by an individual of the time of actual stay on the territory of the Republic of Belarus, submission by an individual of confirmation of the status of a resident of a foreign state, submission of information by tax agents, banks, postal operators, garage cooperatives , cooperatives operating car parks, gardening partnerships and (or) dacha cooperatives, approved by Resolution of the Ministry of Taxes and Taxes of the Republic of Belarus dated December 31, 2010 No. 100.

This confirmation will be valid for the calendar year in which it was issued (certified) or for the period specified in it.

At the same time, if there is a confirmation accepted by a tax agent or tax authority for the current calendar year, such a confirmation issued (certified) in December of the current year* without indicating the period for which it is valid is accepted as confirmation for the subsequent calendar year.

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* For the purposes of Art. 182 of the Tax Code, the current calendar year is the year in which the confirmation was issued (certified).

When submitting confirmation to the tax agent before the date of payment of income, in respect of which the international treaty of the Republic of Belarus provides for provisions other than those established by Chapter. 16 of the Tax Code, in relation to such income, the tax agent does not withhold income tax from individuals and does not transfer it to the budget, or withholds it and transfers it to the budget at reduced tax rates established by this international treaty of the Republic of Belarus.

If confirmation is not provided to the tax agent, income tax is withheld and transferred to the budget in accordance with the established procedure.

Submission of confirmation to the tax authority is the basis for exemption from payment of income tax or payment of this tax at reduced rates.

At the same time, the Tax Code determines that the return (offset) of previously paid (withheld) income tax, in respect of which international treaties of the Republic of Belarus on taxation issues provide for provisions other than those established in Chapter. 16 of the Tax Code, is carried out by the tax authority or tax agent in Belarusian rubles after the payer submits confirmation and an application for a tax refund (offset).

Example 6

A Belarusian organization purchased a passenger car worth 80 million rubles from a Lithuanian citizen on the territory of the Republic of Belarus.

A citizen of Lithuania is a tax resident of this state. However, when completing the transaction, he did not provide the Belarusian organization with confirmation of his residence.

According to Art. 13 of the Agreement with Lithuania, income from the alienation of any property other than those listed in paragraphs. 1, 2 and 3 of this Agreement* are taxable only in the contracting state of which the person alienating the property is a resident.

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* Such property includes:
- real estate, shares in a company whose assets consist mainly of such property;
- property, other than immovable property, forming part of the business property of a permanent establishment which an enterprise of one contracting State has in the other contracting State, or property, other than immovable property, relating to a fixed base available to a resident of one Contracting State in the other Contracting State, for the provision independent personal services;
- ships or aircraft operated in international transport, or property other than real estate associated with the operation of such aircraft or ships.

Taking this into account, a Belarusian organization does not have the right to withhold income tax from the income it pays.

At the same time, in order to be exempt from paying income tax, a Lithuanian citizen must provide a Belarusian organization as a tax agent with confirmation that he is a resident of Lithuania, issued (certified) by a tax or other competent authority of this state.

Since in the situation under consideration the specified confirmation was not provided to the tax agent, he is obliged to withhold and transfer income tax to the budget in the manner established by the Tax Code.

If a Lithuanian citizen subsequently submits to a Belarusian organization confirmation that he is a resident of Lithuania, issued (certified) by a tax or other competent authority of this state, as well as an application for a refund (offset) of income tax withheld from him, it will be obliged to make such a refund ( test).

Income tax is, as a rule, a tax on the income of citizens of the state. The main type of tax that is paid to the country's budget. Usually calculated as a percentage of the income received by an individual or legal entity. At state enterprises, the amount of income tax for employees is calculated by an accountant, and for individual entrepreneurs and companies - depending on the state and the chosen management system.

Income tax rates in 2015

Let's look at the income tax rates that currently apply:

• 13% - on income paid as dividends,
• 16% - on income received from business, notary and lawyer activities,
• 9% - on income related to high technologies,
• a fixed amount for income tax from real estate rental is established separately by the regional and Minsk city councils, if the amount of such income does not exceed 43,660,000 rubles per year,
• 13% - for all other types of income.

To avoid errors in calculating income tax, and therefore fines, we recommend seeking qualified help from an accountant.
Tax deductions

In fact, the main difficulty in calculating income tax lies in the correct application of existing tax deductions.

Deductions for all taxpayers include:

730,000 rubles, with income less than 4,420,000 rubles per month,

210,000 rubles for each dependent or child under 18 years of age,

410,000 rubles for each dependent or child under 18 years of age, provided to a widow, widower, guardian, or trustee,

410,000 rubles for parents with two or more children or a disabled child.

Persons specified in Article 164, paragraph 1, paragraph 1.3 of the Tax Code are entitled to a deduction in the amount of 1,030,000 rubles.

The cost of vouchers for children under 18 years of age, as well as gifts, prizes, financial assistance provided at the main place of work, assistance to orphans and the disabled are also deductible.

How to calculate income tax on salary?

Let's calculate the income tax for an employee whose taxable income is equal to 4,000,000 rubles per month and who has two minor children. The employee’s income is less than 4,420,000 rubles, which means he has the right to a deduction in the amount of 730,000 rubles. Also, for each child the deduction is 410,000 rubles. We get: 4,000,000-730,000-410,000-410,000=2,450,000. Now, from this amount we calculate the amount of income tax: 2,450,000*0.13=318,500.

In any case, if questions arise in calculating income tax, an accountant is the best adviser.

The tax system of the Belarusian Republic was formed on the classical principles of taxation.

The Tax Code of the BR includes 2 parts: general and special. The first part was adopted and approved on December 19, 2002. It states that tax legislation includes legislative acts of the Tax Code and international negotiations, as well as acts of the President and state and local authorities.

The general part of the Tax Code specifies the basic terms and concepts regarding taxation in Belarus.

Read more about the standard of living in Belarus.

7 years after the approval of the general part, the government approved a special part of the Tax Code, which includes a description of all taxes and fees in the Republic of Belarus. The special part was adopted on December 29, 2009.

Classification of taxes in Belarus:

1. Local.
2. Republican.

Republican taxes are the main taxes that form the state budget of the Belarusian Republic.

Value added tax is an indirect tax, since the payers are not entrepreneurs, but consumers of goods and services.

VAT rate in Belarus

Tax rates:

• 20% is the general rate applied when selling goods.
• 10% is the rate that applies to the sale of plants, poultry, livestock and animals, fish and beekeeping products produced in the territory of the Republic of Belarus.

The general income tax rate is 18%. But there are a number of exceptions when the rate is reduced.

List of situations that contribute to reducing the income tax paid:

1. Production of high-tech goods – 12%.
2. Dividends – 12%.
3. Production of laser and optical equipment – ​​10%.

Income tax is paid once a year by enterprises and organizations that make a profit in the course of their activities. The declaration is submitted to the tax office by January 22, and payment must be made by March 22 each year.

Personal income tax

Income tax is paid by citizens on a monthly basis. The tax forms almost 10% of the state budget of the Belarusian Republic.

In addition, if a person has deposits in financial institutions or banks, then he is required to pay tax on the deposit. The tax contribution is equal to 13% of the income received from the deposit.

The calculation of the tax rate depends on the type of human activity. So if a resident of the Republic of Belarus receives dividends, then he is obliged to pay 13%. Income from business, lawyer or notary activities is subject to a tax of 16%. The uniform income tax rate for individuals for all other types of activities is 13%.

Persons who rent out apartments and houses for the purpose of generating income are also required to pay income tax.

Short video about taxes in Belarus

Table: tax amount for renting out apartments

Income tax deductions

The standard tax deduction is the amount by which income taxes are reduced. Deductions are income tax benefits that can be used by such citizens of the Republic of Belarus as:

1. Residents of the Republic of Belarus with a monthly salary below the established limit (563 Belarusian rubles). The income tax refund is 93 Belarusian rubles.
2. A parent raising a child under 18 years of age alone. Deduction – 52 Belarusian rubles.
3. Parents with more than 2 dependent children. 52 Belarusian rubles are returned.

Property Tax Fee

Real estate tax is paid by all citizens of the Belarusian Republic who have personal real estate, that is, real estate and housing in this country. It is paid by both individuals and legal entities.

Objects subject to taxation:

1. Apartments.
2. Own rooms.
3. Garages.
4. Parking spaces.

Even if a person is not the full owner of one of the above objects, but only owns a share, then he is also obliged to pay this type of tax.

According to the law, a person has the right to choose for which real estate he will pay tax. To do this, you need to write an application to the tax office. If a person does not write an application, then the tax will be imposed on the property that first appeared in the ownership of the BR resident.

The following are exempt from tax:

1. Large families (more than 3 children).
2. WWII veterans.
3. People of retirement age.
4. Disabled residents of the Republic of Belarus.
5. Persons with 1st and 2nd disability groups.

Real estate located in rural areas is not subject to taxes.

All persons who use real estate for business activities are required to pay real estate tax.

The tax rate is 0.1 percent of the total value of the property. Payment of the fee is made through a bank, post office or tax office before November 15 of each year.

The Belarusian Republic also has a tax on profits from the sale of real estate, but there are some nuances here. To understand them better, we need to consider the situation with an example. There is no inheritance tax in this country, so even if a person inherited an apartment or house, he will not have to pay anything.

The share of real estate taxes in total tax revenues is 5%

If he wants to sell this apartment or house (or any other real estate) for the first time, then he also does not pay any taxes. But if a resident of the Republic of Belarus sells a second property within 5 years, then he is obliged to pay income tax to the state on its sale. The tax amount is 13 percent of the difference between the purchase price of real estate and its sale.

For example: a person inherited a house (or he bought it himself) for $50,000, and he sold it for $60,000, which means that the person pays 13% of $10,000 to the state budget.

Find out how to get a Belarusian passport,

Land tax

Land tax is paid by owners of land plots in the Belarusian Republic.

Table: land tax rates

Environmental tax

Environmental tax is paid by business entities for harmful effects on the environment.

Environmental tax is paid if enterprises carry out:

1. Emissions of pollutants into the atmosphere.
2. Storage or disposal of production waste.
3. Wastewater discharge.

Tax contribution on the extraction of natural resources

Taxes are imposed on the following types of activities:

1. Potassium mining.
2. Oil production.

Not subject to taxes:

1. Production of associated petroleum gas.
2. Sand mining.
3. Soil extraction.
4. Extraction of underground and surface waters.

Stamp duty

Stamp duty is paid by individuals and entrepreneurs.

Tax rates:

• 15% - transfer to international organizations.
• 20% - issuance of copies of promissory notes and bills of exchange.

If you are thinking about living in Belarus for a while, read how.

Local taxes

Dog ownership tax

People who have dogs are subject to taxation. In 2017, the dog tax was slightly changed. Let us recall that until 2017, the amount of tax on pets depended on the size of the pet.

Table: tax rate for keeping pets

The base rate is 24.5 Belarusian rubles.

Resort fee

The resort fee refers to local taxes and fees in the Belarusian Republic. The resort fee is paid by individuals who are on vacation in such institutions as:

1. Dispensary.
2. Sanatorium.
3. Health Center.
4. Health Camp.
5. Pension.
6. Recreation center.

Other tax contributions

The tax on parasitism in Belarus is a special levy that all citizens of the Republic of Belarus who have been unemployed for more than six months are required to pay. This tax contribution was introduced to prevent social dependency and reduce unemployment in the republic.

This tax contribution is not paid:

Tax evasion is regarded as an administrative violation and is punishable by a fine.

One of the most absurd taxes in Belarus. Watch the video

In 2018, the tax on parasitism was 20 basic units.

Despite the fact that due to the introduction of the tax, the state budget was significantly replenished and unemployment decreased, the authorities canceled this fee in 2018.

The Ministry of Finance has taken up the task of adjusting the Tax Code and the tax system as a whole. As planned, it should become simpler, understandable and convenient. And in the future, a reduction in income tax and profit tax rates is not even ruled out. But, taking into account the interests of people and business, it is important not to expose the state budget. After all, behind tax deductions, fees and duties are our medicine, education, public sector salaries and pensions, security, new roads, housing. Doctor of Economic Sciences, Professor Elena Kireeva discusses how to find a balance in this issue.

- Elena Fedorovna, in any country taxes can either slow down or stimulate the development of the economy and business. What do we have? How would you assess the level of tax burden in the country?

Today, the tax burden to GDP without contributions to the Social Security Fund is approximately 25 percent. Simply put, the state “takes” a quarter of earned income from enterprises and individuals into the budget. Is it a lot or a little? For comparison, I will say that 10 years ago this figure was 35 percent. From 2008 to 2012, the country halved the number of taxes. If we compare with other countries, the tax burden in the USA, Japan, and China is less than ours. At the same time, in Germany, France, Denmark, and Sweden it is much higher.

This 25 percent includes income tax, profit tax, property tax, and excise taxes. But the largest revenues to the budget come from VAT - more than 30 percent. In addition to the actual tax payments, enterprises also make contributions to the Social Security Fund. Today they make up 34 percent of wages, but citizens contribute only one percent. The rest is covered by the employer.

- And just these payments significantly increase the fiscal burden on business entities?

Exactly. And the problem is not that these contributions are high, but that it is difficult to reduce them. Because this money forms the basis for financing social projects, paying pensions, benefits, and so on. If social payments are transferred from the shoulders of the employer to the employee, then you and I will have to part with half the salary (income plus 34 percent of contributions to the Social Security Fund). Psychologically people are not ready for this.

In addition, there is also such an indicator as the level of centralization of financial resources. In Belarus it is just over 40 percent of GDP. That is, 40 percent of the cost of all goods and services produced is redistributed through the budget. Compared to other countries, we are in the middle of the pack here. For example, in Western Europe these amounts are even higher than in Belarus. And for our partners in the Eurasian Economic Union this figure is on average 30 percent. But Russia and Kazakhstan have a completely different economic structure. They can afford lower rates, having a safety net in the form of petrodollars and replenishing their budgets through natural rent, which does not affect business entities.

It is important to understand one pattern here. A socially oriented state a priori cannot have a low level of centralization of budget revenues. Otherwise, we will have to pay for medicine, education, reduce maternity leave, child benefits, state support for housing construction and much more from the social package.

Is there a direct connection between business activity, economic growth rates and the level of tax burden?

Undoubtedly. An investor will quickly come to a country where the tax system is simpler. But it’s not only taxes that can “warm up” or hold back the economy. There are other factors for a successful business. For example, the level of security in the country, guarantees of property rights, absence of administrative barriers, preferential positions for export-import transactions, and so on. For example, Mexico has one of the lowest tax burdens in the world. But there is very high corruption and a strong drug mafia, which, of course, discourages business.

In addition, taxes are such a thing that the effect of certain measures does not come immediately. If we reduce the income tax rate today, nothing will happen tomorrow. Because economic entities must first generate this profit. There is no point in expecting that a reduction in the tax burden will be followed by an economic explosion.

- There is an opinion among experts that for effective and fair taxation, only three taxes are enough: on retail sales, excise taxes and a single personal income tax of 10 percent. What is your attitude to such a radical proposal?

Any idea has the right to exist. With such a system, VAT is excluded, which today has many critics. This is one of the most complex taxes, and not only in our system. But all our trading partners in the EAEU use VAT. If we use another mechanism, we break this chain, which in turn will complicate foreign trade activities. Humanity has not yet invented anything that would allow everyone to be in equal conditions and maintain social justice. For example, we have such a type of activity as the gambling business. This is not industry, not agriculture. It is impossible to offer him one option: profit tax, income tax or something else. Land and property are benefits that someone uses, receives income from it, and therefore must pay taxes.

Another thing is that we must strive to improve and simplify tax administration. As soon as we establish many benefits, different scales, rates, the tax system becomes complex and expensive to maintain.

What to do with income taxes? Representatives of the business association consider it unfair when people who work for 300-400 rubles a month are taxed at the same rate as those who earn several thousand dollars.

We had a progressive tax scale. It is very difficult to administer. In addition, the higher the stakes, the more a person will strive to hide his income and go “into the shadows.” And this is crime and certainly a lack of social justice. Therefore, the transition to a flat scale (which was done by almost all countries that entered the market path) made it possible to reduce the share of the shadow economy. In addition, in our country there is no pronounced stratification of society by income and there is not such a number of billionaires as in Russia, the USA or China. Therefore, it makes no sense to establish different income tax rates. And for greater fairness, you can apply, for example, high excise taxes on luxury goods. Or correlate property tax rates.

- By the way, the Ministry of Finance does not exclude the possibility of reducing the income tax rate to 10 percent after 2020.

The rate itself does not show anything. We have two things: rate and base. For example, today there are certain tax deductions: social, property. You can make a bet of 6 percent and remove everything. And we will collect the same amount, but without benefits. The demographic factor also plays a role. With a population of 20 million and an income tax rate of 10 percent, the amount of taxes will be greater than with a population of 10 million and a 13 percent rate. By the way, our country has one of the lowest income taxes in the world.

Again, it’s not just about the size of the bets and the number of payments. Although in the current situation it seems justified to reduce direct tax rates while simultaneously strengthening the role of indirect ones. This trend fully coincides with European tax policy. Over the past ten years, VAT rates have been rising and corporate tax rates have been falling in Europe.

However, further simplification of tax administration is equally important. There are certain expenses that require careful consideration. This could be the optimization of the management apparatus (at some enterprises the management staff is excessively bloated), a review of the current package of tax benefits and the procedure for their provision, a reduction in costs for those industries that themselves should develop, the liberalization of tax penalties, and the decriminalization of business. And, of course, we need to change people’s consciousness and improve tax culture.