VAT increase in 2018 in Russia to 20%
Many citizens assume that after successful elections the period of “loyal” politics will end. Record low inflation, as in 2017, is not to be expected - a sharp rise in gasoline prices for the second quarter of 2018 will cause a jump in prices for other goods. The government is also discussing an increase in the tax base. How much can VAT increase and why is this happening?
VAT increase: latest news
The increase in the tax base as one of the ways to replenish the budget of the Russian Federation has been discussed since 2017. Officials considered various options, for example, the “22x22” scheme was proposed. In its framework, it was supposed to raise the VAT to 22%, but at the same time to lower to 22% the total rate for insurance premiums, which is 30%. But by the beginning of 2018, insurance premiums and value-added tax of 18% remained unchanged.
After the election, the question of how to replenish the state treasury, has become even more relevant. May 27, 2018 newspaper Vedomosti,referring to high-ranking sources, said that at a government meeting it was proposed to raise the VAT to 20%. There is also a possibility of canceling the rate of 10% for preferential categories of business: it is proposed to replace it with an allowance.
Opinions of politicians
Back in December of last year, Vladimir Putin set the task for the officials to “tune” the tax system. Finance Minister Anton Siluanov at a Russian business week in March spoke of a possible increase in fees. In a dialogue with the head of the budget committee Makarov, Siluanov said that he was against raising income taxes and increasing the burden on business, but the government would take the decision. The minister also spoke earlier about the need to reduce insurance premiums, since the rates for pension and insurance contributions in Russia are higher than in most other countries. But the authorities no longer raised the issue of reducing insurance premiums.
Sergei Katyrin, head of the Chamber of Commerce and Industry, is sure that it is impossible to increase the fiscal burden on a business (which means not only taxes, but also insurance sums). For retail industries, such fees will become overwhelming,as a result, small business representatives will leave the market, and large entrepreneurs will significantly increase the prices of goods. This will lead to a jump in inflation.
The head of the Accounts Chamber Alexey Kudrin also spoke out against the VAT increase. He said that it is possible not to raise taxes in the next 6 years, as there are alternative tools for replenishing the budget, in particular, changing the conditions for exporting oil products.
What caused the possible growth
In May 2018, the President of the Russian Federation signed a decree “On the national goals and strategic objectives of the development of the Russian Federation for the period up to 2024”. Among the main areas declared increase in life expectancy of citizens, reducing poverty and increasing fertility. Prime Minister Dmitry Medvedev has calculated that it will take about 8 trillion rubles to implement the presidential program. Now the government is puzzled by the search for the indicated amount.
Raising the VAT rate by 2% will bring in the state budget about 2 trillion rubles, according to analysts. Another $ 2 trillion can be expected if you introduce an increase in the retirement age, and from next year, and at a fast pace - at least for 1 year annually.Earlier this year, the possibility of raising the rate of personal income tax was also discussed, but the authorities have postponed this idea due to fears that the number of companies issuing salaries "in envelopes" will increase even more.
Sergei Kalashnikov, a member of the Economic Development Committee, believes that raising VAT to 20% will not bring the 8 trillion rubles indicated, but will significantly increase inflation, which will negatively affect the living standards of Russians.
Who will be charged
VAT - value added tax - paid by business owners with any kind of profit. It would seem that ordinary citizens do not concern the taxes of entrepreneurs. But who really pays him?
Important. VAT is initially included in the price of each product purchased. That is, to the price for which the entrepreneur purchased the product, he adds his business expenses and income tax of 18%. Thus, the tax increase will result primarily in price increases.
Experts believe that the financial burden will most of all affect the machine-building segment, the energy and tourism business. Costs in these areas will increase from 5% to 7%.
Current state of affairs
The base tariff is still at the same level - 18%, the preferential rate has not changed - 10%. From January 1, 2018, some changes were made to Chapter 21 of the Tax Code of the Russian Federation governing VAT:
- The number of tax agents who are required to pay this fee has increased. These are legal entities and individuals who sell non-ferrous and ferrous metals, as well as animal skins.
- In addition to the increase in payers, the number of preferential categories of business also increased. Fiscal collection of income from certain transactions with medical equipment, purchase and sale of tickets to Oceanariums, sale of state property in special economic zones are not subject to tax. The zero rate will be for companies engaged in the re-export of goods, subject to certain conditions (Article 151 of the Tax Code of the Russian Federation) and airlines operating in the Kaliningrad region.
- For flights within the Russian Federation, they kept the preferential terms of collection in the amount of 10%.
- In the Tax Code also appeared Art. 169, which regulates the effect of the international tax free retail rules - foreigners who purchase goods produced here in the Russian Federation are entitled to a VAT refund.
It is unknown whether the increase in the income tax rate to 20% will be. Officials predict that it will take place in the current year.