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Does Belarus need wealth tax?

Do you remember the hat trick, where you could get a rabbit, flowers and, speaking more bureaucratic, other social benefits? This trick can’t be applied to the state taxation system. To get something out of the budget hat you need to put this something in this hat. By the way, the English came up with a fair tax on hats, which was paid for every purchase. Consequently, the poor paid less, and the rich more. We asked professor Mikhail Kovalev about this problem.

Do you wear hats, Mr. Kovalev?

Mikhail Kovalev, professor, dean of School of Economics in Belarusian State University:
Frankly speaking, I don’t wear them at all. But I know this English joke.

Nevertheless, it is the truth.

Mikhail Kovalev:
It really is. But some five years ago we implemented a flat tax rate schedule for everyone to pay taxes. It used to be 12%, now 13%.  It is relatively small.

A factory owner has more hats than a cleaning woman.

Mikhail Kovalev:
Exactly. That is why some countries have wealth taxes.

I have heard that you are the vocal advocate of this tax.

Mikhail Kovalev:
I’m likely to be affected by the tax. I live in a good house in gardeners' partnership. But I think that you should pay for luxury apartments, cars. It exists in Ukraine and Russia.

Mikhail, what is the tax? What our cameramen and I have paid for?

Mikhail Kovalev:
Now we are in a university, which functions thanks to public money. Everything the country manufactures for a year is a gross domestic product. For taxes, we firstly take a quarter of them and then divide. It was about 95 bn rubles last year.

Resembles a jump-rope rhyme.

Mikhail Kovalev:
Right. The state gets a quarter,  about 24-25%. Ten years ago it was 35%. Business now gets a lot of money. The biggest expenditures are education and public health service that equal 6% twice.

So, we have 24-25%. China has smaller quarter than we have. This smaller quarter is paid by taxes. The Chinese government is making all schools free. But universities are fee-paying. Thus, they may get money.

But they get this money as charges for different services.

Mikhail, what if we reduce the 24%?

Mikhail Kovalev:
I think it is impossible. We would have to make our education totally fee-based, and health services- partially paid. In Sweden, Denmark, Finland, for instance, the government gets about 30%. Even more, our income tax is 13%. If we want our health services, schools to be free, and if we want to get retirement benefits, we should accept it. Yes, we pay 24% to the state budget, but we also pay 12% of GDP on pensions. In our country, 12% is paid by the employer.

Interesting. But in practice we in Belarus earn much more than our employer offers.

Mikhail kovalev:
Indeed.  Salaries make 34%. If we had bigger salaries, we would have pay more on pensions. But we ignore it. So there is no need to compare our salaries with the salaries in Europe, as they pay for pensions from their salaries. My friend is a professor in Germany and he gets 5.000 euros. But it is not as much as it seems to be. He pays 1.200 euros for pensions, the house and so on. Finally, he has a salary which is compared with mine.

It is better when you don’t have to pay money from the salary for different services and pensions.

Mikhail Kovalev:
People adjust themselves to different conditions.

But you would like to get 5,000 dollars, wouldn’t you?

Mikhail Kovalev:
I may say that I have everything I need and it is enough for me.

Does Belarus need wealth tax?