What will be the results of tax burden increase?

The Ministry of Finance of the Russian Federation (MinFin) has enacted a bill of imposing sales tax by regions. The document of the bill was sent for agreement with authorities. By estimate the imposing of this tax will draw more than 650 bln. RUB of extra funds within the first 3 years.

The Ministry suggests setting the maximum tax on the level of 3%. At the same time the sales tax is a regional tax: the decision about its imposing is made at the discretion of the federal subjects and is aimed at solving the problems of regional budgets. It is a reminder that the deficit of regional budgets for the last year was over 600 bln. RUB.

However not all goods and services will be subjects to taxation. For example it is not planned to collect tax from socially important goods like bakery products, dairy products, oils, margarine, eggs, cereals, sugar, salt, potato, medicines, baby and diabetic food, as well as children’s footwear and clothes.

As for services providing, services in the field of Municipal Housing Economy, transport, banks, education, culture and social servicing are exempted from sales tax.

Experts note, that the face of the new law is almost equal to the article of the ten-years-ago Tax Code, excluding tax rate (it was 5% in the previous edition) and tax collection from non-cash accounts. Tax refund became necessary for compensation of the budget’s deficit caused by the increase of expenses for social and military needs, as well as negative economic and political climate.

Vice-prime minister Arkadiy Dvorkovich appeared as advocate of this tax return. However he insisted at replacing VAT with it, reducing the tax burden by that. It should be noted that in the current version of the bill the sales tax imposing will in fact increase VAT.

At the same time the Ministry of Finance and the Ministry of Economic Development were skeptical for the initiative to return the sales tax, since its administration will require large expenditures and will not solve the major problems of the budget. Thus, according to the experts, the greatest benefit from the introduction of this tax should expect regions with the highest effective demand, which are less affected by the budget deficit.

Alexei Ulyukaev, the Economic Development Minister, also adversely commented on the possible increase of the tax burden to supplement the budget in the current economic situation. In his view, to solve the budget deficit must be a more rational approach to the formation of expenditures and income. Reducing primarily dead and costly program, as well as subsidies for unnecessary spending of state companies and natural monopolies.

Despite the fact that the federal government has not yet decided on the timing of administration of the sales tax, retail chains already counting the possible losses. Thus, according to the forecast of retail representatives, additional fiscal burden will doubly increase payments of network. Such a situation will adversely affect the inflation growth and cause many sellers to go into the shadows.

Final decision on the introduction of a new tax has not been made, but the country's leaders have already declared in its favor.