The expert commented on the adoption of the law on VAT increase

© RIA Novosti / Natalia to Seliverstova in photobacteria of the State Duma of the Russian Federation. Archival photoThe expert commented on the adoption of the law on VAT increase© RIA Novosti / Natalia to Seliverstova the image Bank

Economist Dennis Raksha in an interview with NSN assessed the implications of the increase in value added tax (VAT) from 18 percent to 20 percent.

He stressed that it is unclear at what point will increased inflation associated with the rise in VAT. It could happen in 2019, when the law enters into force, or earlier, he said.

According to him, the adoption of a law does not mean that the Russians will have to «tighten their belts».

«According to official estimates, the Central Bank, the impact of rising VAT on inflation will be less than 1 percent. The belt-tightening is not irrelevant,» said Raksha.

On Tuesday the state Duma adopted a law increasing the VAT from 2019. The document retains the rate of insurance contributions to the social extra-budgetary state Fund at 30 percent instead of the previously planned increase. Also provides for the preservation of all existing preferential rates of VAT.

As reported earlier, the Finance Minister Anton Siluanov, the additional resources obtained from the increase in value added tax will be spent on health care, education, digitization and the development of infrastructure. According to him, this will increase investment activity and the growth rate of the economy.

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