PRESS: Payroll tax, VAT reform can cut Russian GDP by 0.9 pp 2019

MOSCOW, Apr 3 (PRIME) -- Russia’s gross domestic product (GDP) may fall by 0.9 percentage points in 2019 if a tax reform encompassing setting a 22% rate for the payroll tax, now at 30%, and value-added tax (VAT), now at 18%, is implemented, business daily Kommersant reported Monday, citing calculations by the Ministry.

The Finance Ministry offered the reform in March saying that it will make formal employment more competitive, while not raising the budget burden.

The ministry explained the effect by an expected growth of inflation because the VAT rate increase can contribute 2.52 percentage points to the current inflation level while reduction of the payroll tax rate will take away 1.06 percentage points. The central bank will react to this, which is why the economy’s expansion is expected to slow down.

The decision on whether to adopt the reform is expected to be made in May 2017, the daily reported.

End