The majority of large Russian companies have announced plans to raise prices because of rising VAT, according to a survey of the Adizes Institute, prepared for RBC. 10% of respondents say that they themselves will cancel the effect of the tax increase
Photo: Vitaly Timkivi / TASS
80% of large companies will increase the prices of their products after growth of the value added tax (VAT), according to a survey of Adizes Institute (an international consulting company in management), conducted for RBC. Prices will rise as the cost of tax will be included in the final price, the study said.
The survey was conducted by questionnaire method from 26 June to 26 July, and was attended by 160 owners and CEOs from big business segment. 20% of respondents work in the Central Federal district, 20 per cent in the North-West, 20% in the Volga and southern Federal district, the remaining 20% — in Siberia and in the Urals. 33% of respondents are employed in industry (food industry, power industry, metallurgy, machinery, fuel) and 17% in construction, 13% in the financial sector. 12% of respondents working in the transport sector, 10% in the it sector, 9% in medicine, 6% in publishing.
10% of respondents reported that the prices of their products after VAT will not change, as the company will take the additional load and will not increase the cost of goods in order not to lose customers. 10% of respondents refrained from answering.
The VAT rise
A proposal to raise VAT, the government launched in mid-June, the tax should increase from the current 18% to 20%. According to the authorities, this measure will give the budget an additional 600 billion rubles annually to the funds received will be used for the financing of tasks from the may decree of President Vladimir Putin (education, health, social welfare, culture), which in General will cost an additional 8 trillion expenditure for six years. The document in three readings adopted by the state Duma, it was approved by the Federation Council.
Against the background of rising VAT, the Ministry of economic development worsened the macroeconomic forecast for next year: GDP growth in 2019 should reach only 1.4% instead of the previously expected 2.2% (in 2020 it will accelerate and will reach 2%, according to the Ministry). The tax increase, according to the Finance Ministry, will lead to an acceleration of inflation by 1-1. 5%. The VAT rise — time shock, said chief economist at Alfa Bank Natalia Orlova: “After it is incorporated into the price level and in the business projects of the companies, its effects will be exhausted. In other words, the negative effects from the increase in VAT is the issue of the early — mid 2019”.
Deputy Finance Minister Vladimir Kolychev explained that the government decided to stop the VAT increase, as it is less hit by the poor citizens. “Discussion on setting up the tax system for quite a long time was conducted, there were a lot of different offers: and sales tax, and the abolition of some benefits, including preferential VAT rates for socially significant goods and other proposed tax maneuver. But in the end I opted for a VAT because it is the least distorting for the business community in the first place. And second, to a lesser extent, will affect the well-being of groups of population with low income,” he said.
Of two alternatives — the increase in VAT or the imposition of a sales tax (assuming the tax burden in this case is the same) — 20% of the respondents chose the VAT rise, shows a survey of the Adizes Institute. 50% of respondents said that for them it does not matter the type of tax, if the tax burden does not affect. The rest either refused to answer or give your own version.
Instead of raising VAT, the government has offered a package of compensatory measures. So, exporters will be able to obtain a VAT refund, because the amount paid by the company for three years, taxes required for this to drop from 7 billion to 2 billion. in addition, we plan to reduce the burden on business by reducing time of Desk audits in the VAT refund and to cancel the “complex for business and discourages investment tax on movable property”, said first Vice Prime Minister — Minister of Finance Anton Siluanov.
Photo: Artyom Geodakyan / TASS
In Russia, as are exemptions for VAT for socially important goods (e.g., meat, milk, sugar, bread, some medical products), the rate is 10% and for exported goods is 0%. The poll shows the Adizes Institute, respondents rarely use the VAT exemptions. 96% of respondents said that they pay tax at a General rate of 18%. Only 4% reported that they have benefits.
Sooner or later
The effect of the VAT increase on inflation “can be realized in the current year”, warned the Central Bank. But 90% of the respondents said that prices will increase when you grow up VAT, that is from 1 January of the following year (despite the fact that the question about the plans to raise prices responded positively only to 80% and 10% abstained). Another 10% of CEOs said again that rates will remain unchanged, and none of the respondents said that he would raise them in the second half of 2018, in order not to create abrupt price shocks for consumers.
Because VAT is a tax that the consumer pays, sooner or later all the products will inevitably become more expensive, says Vice-President “Support of Russia” Vladislav Korochkin. According to him, if the time delay for the adaptation of the user to the new price. “Reserves in excess of the actual return is now virtually none of the sectors is not, therefore, to sacrifice profitability and changing existing business plans no one can not afford,” — he said.
The company can’t afford to maintain prices, agree Vice-President of “Business Russia” Anastasiya Alekhnovich. Cost of doing business in recent years increase due to the increase in the efficiency of the Federal tax service, growth, fiscal charges and fees, inventory costs and tariffs for services of infrastructure monopolies, lists it. According to the expert of the Institute of industrial management, Ranepa Oleg Filippov, most companies now will gradually raise prices to the beginning of the next year there was a sharp breakthrough. But small and medium businesses will attempt to compensate for the increase in the VAT rate due to the reduction of salaries of staff, or rejection of renewal of the fixed assets, as the solvency of customers and sales volume also will decline, predicts Philip.