Russia Moves to Raise VAT by 2% as Budget Deficit Swells
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Russia Moves to Raise VAT by 2% as Budget Deficit Swells
Russia’s Finance Ministry proposes raising the country’s value-added tax from 20% to 22%. The increase will generate an estimated 1.3 trillion rubles ($15.5 billion) in revenues annually.
The increase will generate an estimated 1.3 trillion rubles ($15.5 billion) in revenues annually, according to the Kommersant business newspaper.
The Finance Ministry has sought to reassure consumers, who are likely to feel the strain in the short term, that the impact on prices will be “moderate and limited.” In a statement on Wednesday, the ministry said a reduced 10% VAT rate will remain in place for essential goods like bread, dairy, meat, medicines and children’s products.
Russia’s Central Bank, however, has said the previous 2% VAT hike in 2019 contributed 0.6 percentage points to that year’s inflation. A consumption tax increase can raise inflation because it directly increases the prices of goods and services.