The Russian government's decision on Monday to delay launch of a unified real estate tax based on market prices was probably influenced by concerns over public opinion affecting the forthcoming presidential elections, analysts said on Tuesday.
Russian Economic Development Minister Elvira Nabiullina announced late on Monday that the launch of the unified property tax would be delayed for several years.
"There will be no unified real estate tax for a long time. This is a common position of the Finance and Economic Development Ministries and the Federal Tax Service. We will (still) have a separate property and land taxes," Nabiullina said.
Introduction of the tax would have been problematic due to the need to complete a register of properties in Russia, but the decision to delay the introduction of the tax was also political, an Investcafe analyst said.
“It was obvious in any case that the introduction of the tax before 2014 was impossible, because a large amount of work on the cadaster value (of properties) and harmonization of the entire legislative base lies ahead. And, naturally, pre-election debate and electoral sentiment and slogans are also present,” Investcafe senior analyst Anton Safonov said.
The idea of a single property tax intended to replace two existing taxes on land and real estate emerged several years ago. Its introduction has been delayed several times however, over uncertainty about the mechanism for its implementation.
A single property tax with a proposed rate of about 0.1 percent of market value was seen as a good source of revenue for local budgets, but critics have said it may hit people on low incomes such as pensioners.
“In any case, judging by these statements, the tax will not be introduced prior to 2015. But to my mind, it will be imposed, because a deliberate political decision has apparently been taken and the only open question is the deadline,” Safonov said.
The December 4 parliamentary elections were marred by widespread allegations of fraud in favor of the ruling United Russia party, which won with about 50 percent of the vote. Tens of thousands of Russians went to the streets across Russia to protest the results, which they claimed were falsified.
Russia will also hold presidential elections in March 2012, in which Prime Minister Vladimir Putin is favorite to return to the presidency.
Maxim Klyagin, a consumer market analyst at Finam Management, agreed that unresolved technical issues prevailed in the government’s decision, as well as fears of the new tax increasing social tension.
“This is largely a technical issue. The second aspect being discussed today – whether this issue is linked to social unrest – possibly...also has some influence, although indirectly,” he said.
