Putin’s new tax The Kremlin wants 13 percent of the interest and dividends Russians earn on large bank accounts and securities

In his national address on Wednesday, Vladimir Putin announced plans to impose a new 13-percent tax on bank accounts and securities worth more than 1 million rubles ($12,670). The tax will apply not to these sums of money but to the income earned on these funds — to the dividends from securities and interest on deposits. Currently, the average interest rate on bank deposits in rubles is about 5 percent. After the new tax is introduced, confiscating 13 percent of this money, the average interest rate will fall to 4.35 percent (5 x 0.13 = 0.65). In other words, Russians with bank accounts worth 1 million rubles earning an interest rate of 5 percent will need to pay the government roughly 6,500 rubles ($83), leaving account holders with 43,000 rubles ($550) in earned interest.

The new initiative will net the government at least 111 billion rubles ($1.4 billion) in tax revenue. This calculation is based on numbers showing that the total volume of bank accounts in Russia is roughly 31 trillion rubles ($398.6 billion) and roughly 55 percent of these accounts contain more than 1 million rubles. 111 billion rubles is a lot of money in Russia. For example, the government’s reserve funds in 2020 amounted to about 300 billion rubles ($3.9 billion). At least some of this money is earmarked for assistance to businesses suffering from the coronavirus economic slowdown.

Moreover, this is using a very conservative estimate. These numbers do not reflect that one person can have several bank accounts worth more than 1 million rubles collectively. To count all these accounts, Russia’s Central Bank will likely require commercial banks to report this information. For example, this is how the Russian authorities enforce restrictions imposed last year on total debt burden. The details of this program won’t be clear, however, until lawmakers draft and adopt the legislation to make it official.