How Will the Increase of VAT to 22% Impact Russia's Agricultural Sector?
Key Changes
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Increase in the base VAT rate by 2 percentage points to 22%;
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Maintenance of a reduced 10% rate for essential goods;
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Reduction of the VAT exemption threshold from 60 million to 10 million rubles;
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Cancellation of reduced insurance contribution rates for SMEs that have been in place since the pandemic.
Industry Opinions
The dairy industry expects an increase in production costs and prices. "Even with the preservation of benefits for basic products, logistics, services, and raw materials costs will rise. This will lead to higher retail prices and reduced purchasing power," said Lyudmila Manitskaya, director of the Dairy Union.
The Pig Breeders Union assesses the risks as minimal since the main products fall under the reduced rate. "Since the tax increase mostly does not affect agricultural products, we do not see significant risks," noted Yuri Kovalev, CEO of the union.
The fisheries sector will also retain benefits for most products. However, the VARPE highlights the issue of insurance contributions. "Shore-based plants working with domestic raw materials are deprived of reduced rates, while processors of imported fish have them. This creates unequal competition," explained the association.
The pet industry forecasts increased costs and staff reductions. "VAT will impact the payroll fund. Many enterprises will be forced to cut costs as compensating for additional payments is difficult," said Tatyana Kolchanova, head of the Pet Business Enterprises Union. She emphasized that the increase will affect rent, logistics, and feed production: "Producers of feed, additives, and veterinary drugs will be forced to raise their selling prices."
