The Russian Finance Ministry is considering canceling value-added tax (VAT) to help repatriate dozens of billion rubles in a move the market has been waiting for dozens of years, Deputy Minister Alexei Moiseyev declared on September 7.
“The issue is only discussed, and an additional stimulus for its solution has appeared. You can already see that the government pays much attention to capital repatriation,” he said. “It turns out that many people would like to repatriate capital but invest it in gold ingots, rather than in the banking system. This is their right, the barrier for this is now VAT.”
VAT is not refunded, when a customer sells ingots back to a bank. The tax amounts to 18% now, but it will rise to 20% from January 1, 2019.
“We receive requests, including those from banks that say that there are clients ready to pay large sums of money, in the range of a billion rubles to buy gold. At that, the client wants to have the possibility of withdrawing a couple of ingots when he wishes. If the measure helps us repatriate even several dozens of billion, it will be justified,” Moiseyev said.
The Finance Ministry initially wanted to introduce a trade-in like system, because it only wanted to release from VAT investment gold, not gold to be used by jewelers.
“The problem is that you can never control the flow. We have really discussed lifting VAT from investment gold for many years, but we have later rejected the idea, because you cannot bar jewelers from buying investment gold,” Moiseyev said. “If you want to cancel it, you have to cancel everything.”
Household demand for gold skyrocketed in Kazakhstan after cancellation of VAT.
However, Moiseyev said that there was no final decision.
“The decision is to be made by the authorities,” he said. “On the other hand, you understand that gold is not a thing of prime necessity, this is not bread. There are things, which people need more, but VAT on them is not cancelled.”
Moiseyev also said that the ministry wanted to release jewelers from state control over silver through branding because of its cheapness.
“We plan to change the law to relieve the jewelry business of government control over silver,” Moiseyev said. “State control over precious metals and gems is linked to the high possibility of money laundering, but silver is now so cheap that you can control nickel as well, for instance. We are preparing amendments to either cancel state supervision over silver altogether or for items weighing less than 1000 grams.”
But he said that silver ingots should retain state control.
He said that in fact there had already been no state control over silver things weighing less than 3 grams, but producers had to brand them.
“In many cases the customer demands branding anyway,” he said. (Prime/Ukrainian metal)
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