Russia Moves to Raise VAT by 2% as Budget Deficit Swells

6 comments

1. So now the people must pay for their government war

2. This feels like Christmas. Or even better, Messiah’s coming. We heard so long about the upcoming Russian economic collapse and it’s already starting!

   Can’t wait for the next year. Russia will be in pieces.

3. good start! road to 100%!

4. Ooh, lovely. VAT increases are very much seen as a last resort, since it’s an immediate increase in inflation, and CPI prices are calculated after tax. It also drives more people to the grey market economy.

   They are going head long for a high inflation, negative growth economy, with increasing government deficit, and declining tax receipts. Not a great combination.

   Edit: Actually, they’re burying the lede here. This is bigger news than a 2% hike:

   > Another part of the new budget proposal announced on Wednesday seeks to sharply lower the VAT threshold for small and medium-sized businesses using Russia’s simplified tax system, cutting it to 10 million rubles ($120,000) from the current 60 million. Officials say the change is meant to curb “fragmentation” schemes in which businesses split operations to avoid higher taxes

   Lots of independent traders are going to have to charge VAT now, when they wouldn’t have previously. The net effect will be driving more people towards cash transactions. This won’t help their impending banking crisis at all.

5. So, there’s no money, no oil, no young men… Seems like Russia is going for a bright future.

6. VAT is one of the worst taxes ever. It’s regressive and causes deadweight losses. Russia should have taken Fred Harrison’s advice in the 90s and implemented LVT as the main source of government revenue. Too bad.

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