Introducing a sales tax cannot be regarded as an alternative to the tax maneuver

25 april 2017 | RBC

MPs and senators are going to propose their variant of tax reform to Russia's Security Council. They want to give the regional governments the authority to impose a sales tax as part of the move to shift the tax burden from manufacturing to consumption. The government is currently discussing a tax maneuver they are calling 22/22, which aims to increase the VAT rate from 18 % to 22 % while reducing the total social insurance premium rate from 30 % to 22 %.

Gleb Pokatovich
Gleb Pokatovich
Deputy Head

"Introducing the sales tax should not be regarded as an alternative to the tax maneuver; rather, it is another facet of it, given the fact that the 22/22 formula does not affect regional budgets," Deputy Head of the Analytical Center Gleb Pokatovich told an RBC correspondent.

It should be noted that Russia had a sales tax between 1991 and 1992 and between 1998 and 2004. During the latter period, it was left up to the regional governments whether or not to impose it and the maximum rate they could use was 5%.

According to Vedomosti, the tax may be levied as a retail duty, which means the local governments will be able to avoid having retailers show it on their receipts and add it to the prices. This approach will also allow the government to circumvent the 2003 ruling of the Constitutional Court which stated it was against the Constitution to impose a tax on the price of goods purchased by sole traders.