Russia will institute a new, "more humane" system of income tax collection, Tax Minister Alexander Pochinok announced following the Russian State Tax Academy's first graduation ceremony on July 9. The scheme calls for a moratorium on new while lowering existing ones, he said.

The Tax Ministry will also set the income-tax ceiling at 35 percent, Deputy Tax Minister Dmitry Chernik said recently.

A ministry working group has been analyzing taxpayers and regional fiscal organs' opinions and recommendations, Chernik reported. The group will soon finalize a bill to be submitted to the government by August and to the State Duma (lower house of parliament) by Aug. 20, together with a draft budget for next year.

The working group followed international standards while drawing up its draft law, specifically the standard European income tax ceiling of 30 percent, Chernik said. He added that with Russia's existing system - where the income tax ceiling is set at 45 percent - will increasingly drive Russians to evade taxes and smuggle money out of the country.

Chernik said it is necessary to simplify tax collection to exempt medical and health care expenses and incomes equal to or below the subsistence minimum from income taxes. However, such a policy would require that Russia adopt a law on subsistence minimums.

"The proposed innovation appears sensible. But steps in this direction have already been made. It is too early to draw conclusions as long as we do not know whether or not the Tax Ministry's proposals will be adopted," Natalia Guseva, a spokesperson for the Economic Analysis Bureau, said.

"In developed countries, income taxes are a primary budget revenue source, while in Russia, budget revenues are basically comprised of money from indirect taxes, such as Value Added Tax and excise taxes," Russian-European Center of Economic Policy expert Maria Gorban said.

It is necessary to make the system of income tax collection maximally transparent for taxpayers and easy for fiscal organs to implement, she concluded.

"The proposed measures essentially amount to reverting to the Tax Ministry's old plans," said Vladimir Pantyushin, an analyst with the Russian-European Center of Economic Policy. The Tax Ministry's strategic plan is to simplify income tax collection, adjust mechanisms to monitor taxpayers, reduce exemptions to the minimum, eliminate loopholes for tax evasion and after all that is done - to continue to boost tax revenues in general, through such measures as increasing tax rates.