The government is stimulating owners of financial savings to spend more and making the practice of depositing savings less rewarding. This measure could hold back the economic slowdown in the country.
Vyacheslav Kosakov, lawyer and Managing Partner at the Novator group of law firms, sees this approach in the decision to impose a 13% tax on income from bank deposits exceeding RUR 1 mio ($12.8K).
The decision came as only one in a whole list of emergency measures to support the Russian economy that was announced by Russian President Vladimir Putin amidst the coronavirus pandemic.
With deposit interest rates already low and a tax on this interest, this financial instrument becomes less attractive, even if slightly, the expert clarifies. It means that if the deposit used to have a profitability of 5%, it will now go down to 4.35%.
“It seems to me that the government is counting on an emotional aspect. People will be depositing less and using the money to purchase goods and property, which will, of course, help to support the economy,” Vyacheslav Kosakov says.
The tax on deposits may also motivate people to invest in more profitable financial instruments. However, it should be reminded that personal investment accounts are already subject to a 13% tax.
“The profit from these investment accounts is subject to the tax that is withheld the funds are withdrawn or the account is closed so a tax is not something new when it comes to investment securities,” Vyacheslav Kosakov explains.