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Russia by the Numbers: Single social tax to be amended

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MOSCOW, January 10 (RIA Novosti, Peter Lavelle)--A leading Russian business daily reported Tuesday that the State Duma, the country's lower house of parliament, was considering amendments to the current 26% single social tax.

According to Kommersant, the potential changes include dividing the tax into two parts: one will go to the budget to meet part of the existing needs of pensioners and other social groups, and the second will directly go to finance the paying employee's future pensions and existing medical requirements.

The paper said the tax had been cut from 35.6% to 26% from Jan. 1, 2005, and according to the Federal Tax Service this move resulted in a 39.3% year-on-year decrease in receipts in 11M05. As a result, the State Pension Fund now faces a deficit of $3.3 billion for 2006.

The Duma is mulling an overhaul of the current system that would see part of the funds raised from the Single Social Fund sent directly to the budget to finance part of current pension payments and one-off payments and the remainder transferred to insurance schemes between employers and employees. This division already exists, according to Duma representatives, with around 6% of the current 26% raised sent directly to the budget; the Duma thus argues that the reform will make the current system more efficient.

The daily went on to say the Finance Ministry opposed the Duma initiative, claiming it would be too much too soon and that it failed to address the main issue of where to raise money to finance payments to the non-working segment of the population, particularly today's pensioners.

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