Prices for socially significant products will grow by 4-11%

23 november 2018 | Izvestia

The Analytical Center calculated that bread, eggs, pork, milk and sugar would rise in price by 4-11% in 2019, and informed Izvestiya thereon. This refers to socially significant products with 10% discounted VAT. However, the cost of production will increase due to the increase in tax, and this will affect the price of products.

Anastasiya Sysoeva
Anastasiya Sysoeva
Department for Expert Analytics

"Despite the preservation of the 10% discounted VAT rate for socially important food products, an increase in their prices will take place in the near future," explained Ms. Sysoyeva. "To a greater extent, it will be associated with the influence of indirect factors, in particular, the increase in the VAT on goods and services associated with food production. Moreover, non-tax factors also affect food prices—for example, rising inflation."

According to Ms. Sysoyeva, the rise in prices for products in 2019 will largely depend on the depth of their processing: the longer the production chain, the stronger the increase in the VAT will be. The expert emphasized that, according to the Federal State Statistics Service, the share of VAT accrued at all stages of the food chain does not exceed 10% in the structure of the retail price of basic food products. The VAT in the price of minimally processed products is the lowest one. These are, for example, live and fresh fish and chicken eggs: 2.7% and 5.6%, respectively, in 2017.

The highest tax burden is observed, for example, in the bakery segment. This is because such products are made of many ingredients, some of which can be purchased at the basic VAT rate. Moreover, next year the manufacturers will increase the costs of production processes (leasing and utility payments, the acquisition of production services), general economic (office rental or legal services) and commercial expenses.

Source: Izvestiya