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State Duma approves palm oil VAT increase to 20% in final reading

The lawmakers suggest that the additional revenue should be allocated to support dairy producers

MOSCOW, July 24. /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% in the third and final reading.

The provision was approved as the amendment to the second reading of the draft law lowering the VAT rate for fruits and vegetables to 10%.

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 approval but not earlier than the first day of the next VAT fiscal period.

The decree contains the State Duma’s recommendation to the government to use additional revenues the federal budget receives thanks to raising the VAT rate for palm oil by 20% to implement measures on boosting productivity in dairy cattle breeding as part of the state program of agricultural development and regulation of agricultural products, raw materials and food for the years 2013-2025." According to the lawmakers, it will prevent consumer price hikes for basic goods.

According to the data provided by the head of the Budget and Tax Committee Andrei Makarov, the abolition of VAT benefits for palm oil will give the budget 4.5-5 bln rubles ($71.2-79.2 mln).

"In our opinion, the additional funds we can receive for the budget could be used to support milk production so that, on the one hand, we could provide good conditions for our domestic dairy producers, and on the other hand, the price of these products, based on high-quality, natural milk, was affordable for our citizens," State Duma Speaker Vyacheslav Volodin commented.

"This decision, among other, sets the goal of supporting domestic producers. But human health is the main thing," Volodin pointed out.