Adjustments of VAT and income tax of banks

Abstract

Subject. The article discusses excess profits of Russian banks in the amount of the planned Federal budget deficit in 2023, and financial relationships between banks and the budget as causes of excess profits. Objectives. The focus is on fairer taxation of commercial banks, using the case of the largest of them, and based on the latest experience of other countries. Methods. The study employs the comparative analysis of other countries’ practice on modifying the taxation of super profits of banks, financial analysis of reports of the largest banks regarding the specifics of the main taxes. Results. The article shows a zero net impact on the budget from bank operations. Budget payments by banks include income tax, tax on dividends, dividends to the State owned shares. Indirectly banks pay VAT on interest on corporate loans, interest on treasury funds in banks. Payments from the budget to banks include OFZ coupons and interest rate subsidies, banks earn margin on the treasury funds, zero VAT tax expenses on bank transactions with individuals. The international experience shows that other countries actively modify taxes on banks’ super profits. Italy and Spain introduced special taxes on banks, Brazil – a tax on financial transactions, Germany and Britain raised income tax rates, the U.S. regularly collect multi-billion dollar fines, France levies VAT on banks and encourages the European Union to do so. Conclusion. The fiscal effect of my proposals is about 1 trillion rubles, or one-third of the budget deficit. I offer to abolish zero VAT on bank operations with individuals, based on excess profits of banks, social inequality, and digitalization of tax control. Income tax for banks should be a minimum of 1% of risky assets, and it can be used to directly subsidize interest rates at the level of specific banks.