Russia's VAT rate hike bill passed in second reading

Russia's VAT rate hike bill passed in second reading

Russia’s State Duma passed the bill on raising value-added tax (VAT) to 20% from 18%, starting from 2019, in the second reading today. 

The insurance contributions are currently paid in full at a rate of 30% for an annual income,  after which limit the income is subject to a rate of 10% without any further limitations. Under the general rule the 30% insurance contributions are divided as follows: 22% is contributed to the Pension Fund, 2.9% is contributed to the Social Insurance Fund, 5.1% is contributed to the Compulsory Medical Insurance.

The advisor on macroeconomics to the CEO of the 'Opening-Broker' brokerage house, economist Sergey Hestanov, speaking to Vestnik Kavkaza, noted that the government decided to raise the VAT rate just because this tax is easiest to collect. "It is virtually impossible to evade it. The increase of 2%in the VAT rate is, of course, cannot be called a popular measure, because it will cause a price increase, but such a reliable collection of taxes will make it possible to replenish the budget. On the one hand, it is not encouraging, like any tax rate hike, but on the other hand, after a month of discussions it is no longer perceived as a disaster," he said.

Chairman of the State Duma's Financial Market Committee, Anatoly Aksakov, in turn, noted that shortcomings of the increase in the VAT rate were manifested more clearly during the second reading. "The expectation of growing consumer prices have increased significantly in Russia. This is bad, because expectations have an impact on real price increases, that is, inflation growth. I do not see any clear benefits over the month of discussions, except that they began to buy goods and components more actively now, in order to pay less later, when the law comes into force," he said.

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