Prices will rise by the end of July

On July 1, a sales tax was introduced in Moscow. So far prices have barely reacted to it. According to experts, their jump can be expected in two to three weeks.

The first attempt to introduce a sales tax was made back in February, but then deputies of the Moscow City Duma and the Moscow government could not agree. The bone of contention was the tax rate. The Duma proposed limiting it to 2%, but Luzhkov insisted on a maximum of 5%. The mayor was concerned about filling the budget, but the deputies were concerned about the social aspect. It’s not that they “cared about the welfare of the people,” they just didn’t want to take unpopular measures. The experience of almost 40 regions shows that after the introduction of a sales tax, price increases reached 20%.
As a result, a compromise was found: the deputies agreed to 4%, but from January 1, 2000. And from July 1 of this year, the tax rate will be kept at 2%. As one deputy put it, “a gradual increase in the rate will lead to the fact that no one will notice the price increase.”
And then July 1st arrived. The first days with the new tax were indeed calm. It was enough to walk around the shops and markets to make sure that there was no significant increase in prices. For example, at collective farm and wholesale markets, sellers did not even know that a new tax had been introduced, although, according to Moscow law, individual entrepreneurs must also pay sales tax. But stores hastened to increase prices by 2%. What did not live up to the hopes of the capital's leadership, which expected that retailers would not raise prices, but would attribute the 2% to the trade markup. But if now some sellers can still solve the problem in this way, since they sell off old stocks, then as they are depleted, losses from the tax (due to intermediary markup) will reach 8%, and this is already completely unprofitable. Now the standard surcharge is 25%, and after paying sales tax, the retailer will be left with about 17%. Stores are unlikely to be prepared for such costs.
Unlike, for example, travel companies, which, due to the absence of VAT, are not going to increase prices. Anastasia Parafilo, deputy general director of the travel agency Pac-Group: The sales tax will not affect the cost of tour packages in any way. We took these losses upon ourselves. We will try to compensate for them by optimizing our own costs. Realtors have the same attitude. Mikhail Davydenko, director of the real estate company Arsenal-Holding: Apartment prices are unlikely to rise. Given the current demand, this is an unaffordable luxury. Now only those who reduce prices survive.
But, you must admit, we don’t travel or engage in real estate transactions every day. So the main blow will fall on stores selling groceries and everyday goods. It is in their example that the flawed nature of the sales tax law is clearly visible. Now an initiative group has been created in the Moscow City Duma, together with the consumer market department, which is engaged in identifying the shortcomings of the law in order to achieve amendments to it at the federal level. For example, according to the initiative group, the tax should not be levied on the entire chain of intermediaries, but only on the final seller, that is, on the retailer. This will not only avoid significant price increases, but also simplify the control system. In addition, representatives of the Moscow City Duma insist on reducing or completely abolishing the list of tax-free goods, which not only protect the poor, but leave a “window” for tax evasion. But changes to the federal law will not be made until the fall, but in the meantime we can advise you to buy products at old prices. A price jump, according to experts, is expected in two to three weeks.

ANNA KALEDINA, EVGENY LEONOV

Magazine "Kommersant Money" No. 26 dated 07.07.1999, p. 8