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RUSSIA'S ECONOMY

Value-added tax to rise from 18% to 20% in Russia

Experts believe that the VAT rate hike to 20% will hinder Russia’s economic growth in 2019

© Maxim Grigoriev/TASS

MOSCOW, December 29. /TASS/. The value-added tax (VAT) rate in Russia will amount to 20% starting from January 1, 2019. Russian President Vladimir Putin signed a law in the autumn of 2018, stipulating an increase of the VAT rate from 18% to 20%, as well as new tariffs for social contributions.

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According to the Russian Finance Ministry’s calculations, the move will boost budget revenues by 620 bln rubles ($8.9 bln) per annum. Legal entities pay the value-added tax in Russia at all stages of production and sale of goods or services. The amount of paid tax is set in the final price of products or services, meaning that it is actually paid by end consumers. The previous VAT rate of 18% was in effect from January 1, 2004.

Russian Prime Minister Dmitry Medvedev believes that the decision on VAT hike to 20% is the least painful solution for people and the economy compared with other options to raise budget revenues considered by the government.

The cabinet has pledged to allocate the funds from the VAT hike for social needs, particularly the healthcare sector. It also decided to keep all VAT benefits for main socially important products and services. The beneficial VAT rate of 10% remains for essential foods (bread, milk, etc.), goods for children and medical products.

Experts believe that the VAT rate hike to 20% will hinder Russia’s economic growth in 2019. According to First Deputy Prime Minister, Finance Minister Anton Siluanov, the move can speed up inflation from expected 3% to 4-4.5%.

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