Italian Vat Rumours and Russian Sales Tax

Italy considers 2015 VAT increase as finances worsen

The latest Italian budget revealed that the government is considering a new VAT rise. Italy raised its VAT rate to 22% in October 2013. Italy had already raised it 1% in 2011 from 20% at the height of the Euro currency crisis.

Italy’s public debt is the second highest in the euro zone as a percentage of GDP, and it has risen steadily to record highs above 130 percent of national output. The government deficit is continuing to drift away from the 3% of GDP target – a key rule for continuing membership of the Euro currency.

Part of Italy’s problems are sharing a currency with strong economies such as Germany. Prior to joining the Euro, Italy regularly used Lira currency devaluations as a tool to maintain the competitiveness of its goods overseas.

Instead, it is looking at raising Italian VAT helping to fund cuts in corporation tax and reduce in regional labour tax (IRAP).

Sales Tax for Russia?

Russian authorities may bring back the sales tax that was in force in Russia during the 1990s, as the country faces the scene of declining revenues from the latest US and European sanctions. It could also potentially introduce an excise duty on top of this.

The tax will apply to all goods and services provided to non-taxable individuals (consumers). Any goods which are VAT exempt, or at the reduced VAT rates, will be exempt from the new tax.

The Ministry of Finance has said that it plans to grant the Russian Regions the power to implement a sales tax of up to 3%. This will be on top of the existing 18% Russian VAT, but there will be no right to deduct or reclaim the new sales tax.

Russia had previously applied a Turnover Tax until the end of 2003.

It is estimated that the new sales tax will cut up to 1% off Russia’s GDP. Russia’s economy is currently at near flat growth rate, and many believe it’s at risk of going into recession, it is estimated the sales tax will increase inflation between 1% and 2.1% per annum depending on retailers’ ability to pass on the rise to shoppers. However Sales Tax has previously been implemented and failed to aid the economy, as an alternative, the Russian government has also proposed to increase the national VAT from 18 to 20 percent.

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