Sergei Belev, Head of the Budget Policy Department, Gaidar Institute commented to the Nezavisimaya Gazeta daily on the RF Accounts Chamber’s data which showed a decrease of Rb300 bn in VAT revenues to the federal budget.

In Russia the second year after the VAT rate hike turned out to be less successful for the federal budget than the first one. The pandemic-driven crisis which brought about a drop in consumer demand made the RF Ministry of Finance introduce substantial amendments to its plans. In 2020, the RF Government expected to collect Rb7.5 trillion worth of VAT revenues rather than about Rb7 trillion. But the actual amount received turned out to be Rb300 bn or 4% short of the target. They collected only about Rb7.2 trillion. Certainly, this is more than before the VAT rate increase, but it is not consistent with the financial bloc’s far-reaching plans.

“Despite a decrease in retail turnover and negative shock for GDP, the contraction of VAT tax base was compensated by the VAT rate increase. Of all the tax increase options available (unless counting in the resource rent tax), the least painful one for the economy was chosen. The problems of the year 2020 were justified by the pandemic, not the VAT rate. Had not the VAT rate been increased, the year 2020 would have seen less VAT revenues,” Sergei Belev noted.