Big Brother Continues to Grow

December 12, 2021

On August 24, President Putin signed an order, which was not published on the Kremlin website, ordering the government to elaborate on the idea of creating a unified national information system on rental housing. This proposal was put on Putin’s desk by Vitaly Mutko, former Deputy Prime Minister of Russia, who is now the CEO of the state company, DOM.RF, and a longtime friend of the Russian president. The arguments are banal: Many Russians who rent out real estate do not pay income tax. This means that they should be forced to do so under penalty of punishment. Moreover, landlords should be forced to make all payments through this system, which will be a tax agent and withhold the tax. According to Mutko’s estimates, we are talking about 162 billion rubles ($2.2 bln) a year, which the budget is missing.

When I saw this amount, I started laughing: It amounts to 0.35% of annual revenues of the Russian consolidated budget and less than 1% of total revenues of regional budgets (in Russia, the entire amount of personal income tax goes to the budgets of regions). Of course, the company DOM.RF has vested interests in creating such a system: If the company becomes the operator of the system, all tenants’ payments flow through its account. Russian law allows the payments to be executed not immediately but on the second day. It turns out that a sizeable residual balance will always be present in the system operator’s account. Of course, the company will not own that money but will invest in the money market, receiving a stable income flow.