The beginning of 2019 will bring Russians not only the holidays, but the increase in prices on virtually the entire range of products. Economists of the Central Bank of the Russian Federation warned that such will be the effect of the increase coming value added tax (VAT) by 2% (from 18% to 20%), and adjustment of the market will occur within two to three months. This means that if the price of any goods not grown, they grow up later.
“In the first quarter we will have significant inflation, most likely, we will see in the data on Jan. Perhaps the process of adjustment under the VAT spread over two to three months. According to our estimates, in the first quarter, annual inflation will be above 5%. In the second half of 2019, the inflation in annual expression will not fully describe the current trends in inflation”, — said the Director of the Department of monetary policy of the Central Bank of the Russian Federation Alexey Zabotkin in an interview.
However, many manufacturers have started to lay in the cost of goods the future of the VAT increase now. Thus, according to the October survey by the Bank of Russia for almost 40% of respondents noticed a sharp rise in the cost of meat and poultry, and about one third reported an increase in gasoline prices. The increase in gasoline prices that began in the summer, in turn, leads to further rise in prices of goods due to increased logistics costs.
Even in the summer, the Central Bank warned about rising prices in the “Report on the assessment of the effect of raising the basic rate of VAT on inflation”. According to estimates by the regulator, the main price increases in response to the VAT rise will occur immediately after the rate changes in the first few months of 2019. However, because the tax increase is announced in advance, and a small adjustment on the part of manufacturers and sellers, including those wishing to undertake gradual adjustment of prices is possible in the fourth quarter of this year, the Russians may feel now after each trip to the store.
According to economists, peak prices may come just in time for the new year period, as manufacturers decide not to wait for the official growth VAT and also wants to capitalize on the population that will cover a festive table. So what to buy for the celebrations. And the more expensive will be all categories of goods, as said in the TSB. Including those who growth, the Central Bank is nominally not affected by, for example, socially important products (milk, meat, sugar), baby products, medicines.
“Some manufacturers and retailers can begin to apply such marketing elements as forming a “nice” price tags, odnomestniy higher prices on interchangeable and interconnected goods with different levels of cost to save is proportional to the product line”, — warned in the Central Bank.
In the end, all the efforts of the authorities to curb inflation, which last year reached record-low numbers of 2.5%, and this year even decreased to 2.2%, will go to pieces. If the official inflation could reach 5%, informal, experts say, can be two times higher.
Inflation is not the best way affect the well-being of the population which is not growing. Real incomes of Russians for the first time in four years began to rise in 2018, and many experts associated with the presidential elections. But by the fall of the indices again turned negative. In September, according to Rosstat, real income fell by 1.5% in annual terms. Does not help even “the record growth of wages,” which says labor Minister Maxim Topilin.
Another reason for the coming decline of welfare — improving tariffs. Prime Minister Dmitry Medvedev has signed a decree on indexing in 2019, the year will pass in two stages. From 1 January 2019 tariffs will be increased by 1.7% given the increase in VAT and from 1 July by 2.4%, just below “indexing fee is not higher than the usual level”.
If, according to classical economic theory, price increases should occur as economic growth and increasing incomes, we have at the beginning of 2019, the year will be the reverse situation — prices will go up dramatically against the background of further reduction of incomes of the population. Accordingly, more consumption will fall, leading to economic slowdown.
The head of the chamber Alexei Kudrin has said that, despite previous forecasts to 2019 the growth of the economy may be less than 1%, while inflation will accelerate to 5-5,5% instead of the targeted 4%. According to the official government forecast, GDP growth in 2019 will slow to 1.3% after 1.8% this year. Thus, economic development does not rule out a slowdown to 1%.
Deputy Director of the Institute of contemporary economy Ivan Antropov is convinced that the VAT increase will have an impact not only on purses of Russians, but also on the economy that is going through hard times.
— The VAT increase as a whole will affect all the goods represented in the stores, without exception. Economists estimate that the average increase will be 1.7% from the current price, but of course you need to look specifically each category of goods. For example, if the mark-up on goods, and so big, the growth of the tax burden can be dissolved and does not greatly affect the final cost.
But when talking about the most basic goods, like bread or buckwheat, which are sold with minimal mark-UPS and which are in demand among vulnerable segments of the population, they will occur symmetrical growth of the prices by about 2%. And for some groups of goods for which the producers long enough to restrain prices in order not to lose customers, growth can be more than 2%.
“SP”: — How necessary was the VAT rise, including how it will affect the population?
— The VAT increase is not the fact that it is not necessary, it’s harmful decision. It will have a negative impact on the costs of businesses that will take over the growth of the tax burden. The VAT rise will affect the costs of companies for employees, in other words, will lead to the reduction of funds for wages. Consequently, there will be potential for the growth of the wage. Reduced purchasing power, demand will fall, and, as a consequence, the volume of production. We can expect a chain of negative effects.
At first glance, the 2% is not such a big figure. But if you count on average how much the government hopes to raise funds through the increase of VAT, for each citizen of our country regardless of age will have approximately 4200 rubles. This is a very significant amount for many. It will have to just give in additional taxes.
Given the fact that revenues now do not grow, but rather tend to fall, and there are no preconditions to ensure that they continue to grow, the VAT increase may have a very negative impact. World practice shows that the development of economy and increase of tax revenues is not in raising taxes, and with their decline. To raise taxes only if the economy is growing at a good pace and nowhere in the negative will not go away. But this is clearly not the case.
Doctor of economic Sciences, independent expert on social policy Andrey Gudkov also believes that the population from the VAT increase certainly will not win anything.
— Originally, the government argued that the VAT need to increase to 620 billion of additional budget revenues, and they, in turn, required to increase pensions. But the thing is that the VAT increase will lead to inflation at 6%. Retirement is on the draft budget will be raised by 7%. Thus, it is expected that real pensions will grow by only 1%. This means that actually the revenue from the increase in VAT on pensions will not be spent and will be spent on some other purpose.
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