Inflation in Russia: results of 2013 and forecasts for 2014

According to the date of the Federal State Statistics Service (Rosstat), the inflation in Russia following the results of 2013 was 6,5%. As a reminder, the Bank of Russia planned to hold back the inflation in the range of 5-6% at the beginning of the year, but rapid increase in food products prices in last months of the year made it impossible to stay within this range.

The inflation in December 2013 was 0,5% and that agreed with analysts’ expectations, but as to the annual figure, so experts' estimations were more optimistic. So that, MEDT of Russia forecasted total growth of prices by 6,2-6,3%. Just a two-tenths (0,2%) deviation from the projected value could seem to be insignificant only at first sight.

There is a so-called «inflation for poor», officially nowhere registered, but hits hard the low-class citizens in the wallet. Many experts note that poor social groups mustn’t be placed into headline inflation, because their consumption structure has an imbalance toward food products. If one man with good income spends on food about 30% in national average (and in developed countries not more than 15%), then poor people – more than 50% from their salaries. Therefore, rapid increase in food products prices dents «inflation for poor», that in fact happens.

According to the date of Rosstat, in 2013 food products and services became more expensive most of all, by 7,3 and 8% respectively. Nonfood goods got more expensive by 4,5%.
The list of non-record holders following the results of 2013 is topped by hen's eggs, which got up practically by one third, more exactly by 28,8% (from December 2013 to December 2012). They are followed by butter (18,6%), alcoholic drinks (14,6%), milk and dairy products (13,1%).

Housing maintenance and utilities services got more expensive for Russian by 9,8% in 2013, medical service — by 9%, telecommunications service — by 2,2%, nursery education services — by 9,9%. Passenger transportation got up by 8,9% in 2013.

Regarding forecasts for 2014, all experts predict the slowing of inflation, because of the freezing of tariffs on natural monopolies' services. According with the official forecast of the Government of the RF for the year 2014, it should be expected the inflation in the range of 4,5-5,5%, while the prediction of the MEDT of Russia — 4,8%.

The Central Bank of the RF (the CB) targets the purpose on inflation at the level of 5% for 2014. Thus in the middle of December the CB informed, that predicts the achievement of inflation goals in the second half of 2014. Also in its statement official regulator noted, that nowadays the deterrents for improvement of inflation dynamics are slow recovery of external demand and weak investment activity. By that, of greater importance needed to reach inflation target values in the medium term, according to the CB, is the formation of positive tendencies in dynamics of inflationary expectations.

Companies using transfer pricing are threatened with tax inspections

After last year’s enactment of the legislation, focused on the regulation of transfer pricing in matters of tax base assessment (Section V-1 of the Tax Code of the Russian Federation), fiscal bodies tackled seriously the inspection of organizations, which use such scheme of tax payment.

Federal Tax Service (FTS) has begun to inspect about 300 enterprises as far back as since the end of 2013. This year the work will be continued. Such statement was made by the Head of the FTS Mikhail Mishustin.

As a reminder, a transfer price is the price, at which goods (or services) are sold between different divisions of a company or between companies in the same group. Transfer prices allow redistributing of total income of the group of persons in behalf of persons located in states with lower taxes. This is the most simple and widespread scheme of the minimization of tax payment via the decrease of tax base.

Major taxpayers have an opportunity to coordinate in advance the principles of the price formation of such transactions with taxmen, by signing of an agreement with the FTS, in which there are positions of parties specified concerning the procedure for determination and usage of methods of the price formation on concrete transactions between related parties. By that the reasonableness of a contract market price, on which basis the tax liabilities are estimated, is not needed to be checked by fiscal bodies. Therefore, the administration of major taxpayers is simplified and possible expenses of enterprises in view of tax inspections are removed.

In other cases, companies are obliged to submit reports, confirming the market price of a transaction with affiliated companies, to tax authorities. For drawing up of the necessary report it can help a special module, contained in specialized software products Ruslana, Orbis, Amadeus of the European publisher of electronic databases Bureau van Dijk (BVD). Besides, the Agency Credinform is developing own transfer pricing module, the release is slated for 2014.