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State Duma votes for palm oil VAT increase to 20%

Industry experts differ in views on the usefulness and harm of palm oil

© Maxim Shemetov/TASS

MOSCOW, July 23. /TASS/. The State Duma [the lower house of the Russian Parliament — TASS] voted for the amendment cancelling the preferential VAT rate for palm oil and fixing its increase to 20%. The provision was approved in the form of an amendment to the second reading of the draft law lowering the VAT rate for fruits and vegetables to 10%.

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Any vegetable oil is currently subject to VAT at the preferential rate of 10%.

The amendment cancels application of the preferential VAT rate of 10% in respect of palm oil sales operations. The standard rate of 20% will apply. The provision will come into force after lapse of one month from the law issuance date in case of its adoption but not earlier than the first day of the next VAT fiscal period.

Russian producers of natural foods believe that abolition of palm oil benefits will make the market healthier and reduce profit of counterfeit producers, particularly when making dairy products. At the same time, representatives of oils and fats and dairy industries questioned by TASS have different opinions regarding usefulness, harm and cheapness of palm oil.

Cancellation of palm oil benefits will positively affect Russian producers of natural vegetable oils, says Vladimir Kaimakov from Donmasloprodukt. "If VAT is increased now, palm oil price will grow naturally. Oils and fats plants and processors will probably turn for sunflower oil as an alternative," he noted.

"Support of the draft law [on palm oil VAT increase — TASS] marks a shift towards enhancing food safety in the country," says Director of Mamruko Company Ruslan Mamrukov.

VAT increase for palm oil should definitely influence the dairy market, Sergei Lyakhov from EkoNiva-APK Holding noted. "If palm [oil products — TASS] are less affordable, then products made of natural milk will be able to get a vaster niche on the market," he says.

Not all producers agree on the harm of palm oil. Exclusion of palm oil from food recipes will inevitably lead to the deterioration of end products, Oleg Kharlanov from EFKO claimed. "Palm oil is a critical ingredient of modern high-technology specialized fats and margarine used in certain leading branches of the domestic food industry," the expert said.

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