Belarusians’ Payroll Taxes Break All Records

Belarus goes ahead of not only the EU but also the CIS countries with regard to the severity of the tax burden.

Business associations have been unsuccessfully trying to reduce the tax burden for businesses for contributions to the social insurance funds for several years. Today, enterprises pay 34% to the social insurance fund, which results in the increase of the production cost and, consequently, in the decrease of competitiveness. Why not redistribute social burden between the company and the employee, the way it is done in other countries?

The fiscal burden, including contributions to the payroll budget, has become a serious obstacle in the way of the development of the Belarusian enterprises. During the meeting of the Council on economic policy at the Business Union of Entrepreneurs and Employers named after Professor M.S.Kuniauski (BUEE) on February 9, the experts tried to find a solution to this problem.

The tax press under the pressure of social payments

In general, the tax burden on companies in Belarus recently reduced, Head of the department of taxes and taxation of the BSEU Doctor of Economics Alena Kireyeva has said. In 2016 it amounted to 24,4% of the GDP against 25,6% in 2014, and in 2017 it is expected to drop to 24%.

If we consider the level of taxation with regard to the types of the economic activity, it is also not critical and tends to decrease, the professor has said. The highest level of taxation was recorded in the oil sector — 19,5%, the lowest — in the financial sector — 0,8%.

However, please note that this information does not include non-tax payments, in particular, contributions to the Social Protection Fund, taxes on foreign trade and the income tax for individuals. Meanwhile, the withdrawals in the form of the social payments remained practically unchanged in recent years (only the payments to the Social Protection Fund account for about 12% of the GDP).

According to the World Bank's Doing Business research, the overall tax rate in Belarus in 2016 amounted to 54,8% of net profit, while in Russia it was 47,5%, and in Kazakhstan — 29,2%. Experts believe that the Belarusian "record" in this area is mainly the result of high payroll taxes (including the Social Protection Fund). "One of the most problematic issues in improving the “Taxation” rating is the “Total tax rate (% profit)" indicator, which remains quite significant — 51,8%. Its main share — 39% — falls on social payments (the Social Protection Fund and the Belgosstrakh), which practically never change", — Alena Kireyeva has noted.

Social tax: it's time to redistribute it between employer and employee

With regard to the severity of the tax burden, Belarus is ahead of not only many EU countries, but also its partners in the CIS and EAEU, which undermines the competitiveness of domestic goods and services as for the price factor. "In Belarus, only the charges to the budget make about 30% of the GDP, another 12% are contributions to the Social Protection Fund. Adding the rest of the fiscal payments, we will most likely have 50%, " — Honorary Chairman of the BUEE board Heorhi Badei has noted.

Meanwhile, the insurance burden has been shared between employer and employee all over the world for a long time. In this case, the workers calculate what they will earn for their future pensions themselves. In Belarus, this tax mainly falls on employers, on the subjects of management. "I am convinced that this is fundamentally wrong. Even Lukashenka’s Directive #4 (Directive #4 of 2010 "On the development of entrepreneurship and stimulating business activity in Belarus" — Editor) provided for the division of responsibility for the insurance burden between the employer and the employee. However, nothing has been done so far," — Heorhi Badei has added.

Meanwhile, there is a direct link between the business activity, the economic growth and the level of the tax burden: the higher the fiscal press in the country, the lower the rate of its development.

"For several years now, our country has been in a recession, and it is necessary to think how to get out of it and turn to the path of development. To achieve this, we probably also need to change our approach to the tax policy, " — Heorhi Badei has said.

Tatsiana Manianok, “Belrynok”