''Who paid 18% VAT, they will also pay 20%''
The participants of a Realnoe Vremya business brunch thanked the authorities for that they have not got to the administration of PIT yet
In January 2019, the value added tax (VAT) rate in Russia is planned to be raised from 18 to 20 percent. This measure will give the budget additional 600 billion rubles. The participants of the business brunch of Realnoe Vremya discussed what the increase in the tax will lead to, how to change consumer demand, prices for goods and services and found advantages in the unpopular decision of the government.
''Someone will raise the price, someone will look for internal sources of cost optimization''
VAT is levied from businesses, but in fact it is paid by consumers, the manufacturer acts as a tax agent. This means that the increase in VAT will affect consumers. Realnoe Vremya experts agreed that prices will rise, but by less than 2%.
''Prices will rise slightly — by 1-1,5%. In theory, it should grow by 2%, but because of competition, growth will be less,'' says Takhir Davletshin, an economist and entrepreneur.
Kamil Umarov, a manager at KPMG JSC, believes that the growth will be 1,6%. ''Demand, willingness of the end user to buy at an inflated price and competition will play a role. Someone will raise the price, someone will look for internal sources of cost optimization. It is necessary to proceed from the sphere in which the company operates and what tax regime it applies — everything will be more difficult for STS taxpayers,'' Umarov believes.
Director of Otkritie Broker Nikolay Laptev expects growth at 1,5%. In his opinion, everything will depend on demand and competition. Laptev believes that the price increase will begin earlier than January 2019.
''Already now there is a slow rise. Small- and medium-sized businesses are already beginning to raise prices, explaining this by different reasons,'' Laptev says.
Businesses expect benefits in exchange for VAT increase
The VAT increase will not affect food (except delicacies), medicines, goods for children, books, textbooks — there is a preferential rate of 10%. Also, the sale of real estate is not subject to VAT. But the prices of these goods will also grow.
''The growth will be little, but tangible, as it will affect almost all industries. Real estate prices are likely not to grow, but on the other hand: if everything grows, other businesses will raise prices, then why realtors should stay aside?'' Laptev says.
''Real estate, yes, is not subject to VAT, but the developers have many VAT costs. Therefore, the prices may also grow, but perhaps the state will offer interesting mortgage programmes to rekindle this market somehow. We have many programmes to stimulate demand for cars. Maybe there will be subsidies, tax incentives for businesses. It is necessary to control this and try to use all support measures,'' Kamil Umarov said.
''We will hear from the government a proposal to increase taxes in 1,5-2 years''
According to Takhir Davletshin, the increase in VAT will lead to a decline in production. In many industries, economic growth will slow down, many will go into gray zone, and this, in turn, will lead to a decrease in tax collection.
''Since budget revenues will be less, then in 1,5-2 years we will hear from the government a proposal to increase taxes. The increase in VAT is a modicum, and it will not save the situation. The government will be forced to look for other ways to replenish the budget and resort to unpopular methods — the abolition of benefits and so on,'' Nikolay Laptev suggests.
''On the other hand, much depends on how these 600 billion rubles will be used (the planned income from VAT increase – editor's note). If they go to a next Olympics, it remains to tighten the belt, and if the collected funds go to support the economy, priority sectors, the growth of minimum pensions and benefits — then consumption will increase,'' says Takhir Davletshin.
Kamil Umarov believes that the increase in VAT rate will not lead to a significant outflow of entrepreneurs to shadow markets: ''Who paid 18%, they will also pay 20%. The question is whether they will be able to shift the burden on their customers.''
''I can not say whether the abolition of benefits or something else will take place, but if you look in general, usually they try to collect taxes from businesses rather than to cancel benefits for population. And what will happen after some time? Business is expecting that they may be offered something in exchange for the increase in VAT. Maybe it is a reduction in insurance premiums because this is the most significant burden on businesses,'' said Umarov.
Thanks that it is not personal income tax
Experts believe that with proper support of small- and medium-sized businesses the increase in VAT rate is not scary even at 25%.
''The main thing that is required now is a reform of VAT and PIT. The countries where taxes are high — they live well. But it is necessary to raise taxes so that it contributes to the growth of production and entrepreneurial activity,'' says Takhir Davletshin.
''Where taxes are high, there are good social programmes. Somewhere housing is free, somewhere — transport, mortgage is low. But our state increased taxes, but nothing changed,'' says Nikolay Laptev.
Kamil Umarov recalled the experience of other countries where VAT was increased. In Germany, he said, 10 years ago the rate was raised by 3% — this led to a slowdown in economic growth.
Speaking of the advantages that will bring VAT increase, the experts of Realnoe Vremya found, in addition to the replenishment of the budget, only one advantage: thanks that is it not PIT.
''VAT increase will give end consumers a choice — you can buy goods and pay tax, and you can not buy and not pay. If the personal income tax or insurance premiums were increased, there would be direct tax burden and there would be no escape from it,'' says Kamil Umarov.