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. Last Updated: 07/27/2016

Tax Hike Decision Is Elusive

The government has still not decided on a proposal to lift retroactively income-tax rates for top earners but the Finance Ministry is pushing for a decision within the next month, finance officials said Thursday.

Finance Minister Boris Fyodorov told the Komsomolskaya Pravda newspaper in an interview that the changes were "working proposals which have not been officially adopted".

The proposals will sharply lift the top income-tax rate for earners of more than 10 million rubles ($8, 130) a year. The rate would rise to 40 percent from 30 percent with the new rate applying retroactively for 1993.

At the same time, the threshold for the lowest tax rate of 12 percent would be lifted to 2 million rubles from 1 million previously, helping low-income workers. This would also be retroactive.

Deputy Finance Minister Sergei Alexashenko said a decision on the proposals should be made soon.

But Lyudmila Mamet, a tax partner in the Moscow office of Coopers & Lybrand, said that according to reliable sources, the government had already dropped retroactivity from the proposal.

"According to our sources, there will be an increase in the tax rate in 1994, but the level of the top marginal tax rate is still under discussion", she said.

Western tax experts have severely criticized the proposal, saying that a retroactive tax hike would hurt foreign investment and add to costs on foreign companies in Russia, which often pay their employee's tax expenses.