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Siarhei Balykin: The Belarusan authorities themselves are pushing the consumer to spend money abroad

08.08.2014  |  Economy   |  Piotr Kuchta, EuroBelarus,  
Siarhei Balykin: The Belarusan authorities themselves are pushing the consumer to spend money abroad

In 2015 the government plans to increase VAT from 20% up to 22%. At first glance, the tax will not grow immensely. But today even such an increase will cause the expenses of Belarusans abroad.

First of all, the planned increase of VAT can not be separated from the planned reduction of income tax rate, i.e. the VAT rise by 2% should be coordinated with the reduction of income tax from 18% to 15%. At first sight, it is even useful for the economy, that is, the government plans to increase the proportion of revenues from VAT, which is an indirect tax, and to reduce the share of revenues from direct taxes - income taxes, to be precise, - says Siarhei Balykin, economist, in the interview with the EuroBelarus Information Service. - In theory, the reduction of income tax is good for the economy, as it allows business entities to retain more disposable money and as a result to spend more on reequipment, investment, innovation and so on. But all this is good only in theory and only in the conditions of functioning market economy”.
 
Balykin believes that “the planned reduction in income tax rate is by no means directed by noble impulses of our sneaks, but by quite strict pragmatism.”
 
According to Siarhei, in the current economic situation the profit of enterprises is not that huge; moreover, it tends to gradual but constant reduction. “Correspondingly, the revenue from income tax is decreasing. Besides, it is rather easy to evade the tax understating the very profit. But it is not that simple to evade the value-added tax, because as an indirect tax VAT is much more attractive from the fiscal point of view. VAT is paid on the so-called credit or invoice method. It means that each business entity exposes the VAT to their customers. At the same time business entities subtract from the resulting customer VAT the amount of value added tax that they paid to their suppliers. The margin must be paid to the budget. Thus, the ultimate burden of VAT lies on the shoulders of citizens, end-customers.” - says Balykin.
 
The increase in VAT will make markets of other countries even more attractive for the consumer. “The value added tax forms a considerable sum in a price for a major purchase. If for a 60$ pair of shoes VAT is only 10$, then nobody will go to Russia because of the two-percent tax increase. But in a price for a car the VAT component will be much more solemn in terms of money. If you buy a new car in Russia, then even now with the VAT of 20% you can save a lot. Naturally, the increase in VAT will only increase the number of people who are not willing to waste their money. That is why I think that for an expensive purchase the Belarusans will more often go to neighbouring countries and export the currency abroad. While the Belarusan authorities will continue to blame the citizens for the lack of patriotism and reluctance to support domestic producers or trading networks,” - emphasizes Siarhei.
 
The economist also mentioned the percent presidential decree which states that import VAT may be accepted as a credit by importers only after 90 days. “It means that importers will be forced to finance Belarusan budget in the amount of VAT, bearing no interest for 3 whole months. But in the conditions of rather high inflation the fact of granting such a loan is basically an import tax. The expenses will be once again compensated by means of increase in prices, which implies the consumer will suffer again,”- notes Siarhei Balykin.

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