We're not losing a cow

The President granted tax preferences to livestock breeding

The tacitly established moratorium on the provision of industry tax benefits appears to have been broken. Despite the constant and numerous attempts of deputies to extract tax breaks for some particular sector of the economy, which are usually thwarted, if not in the Federation Council, then when the bill comes to the Kremlin, it seems that the state is ready to make an exception for agricultural producers. Last Saturday, which fell on a new public holiday, National Accord Day, Russian President Vladimir Putin signed amendments to the Tax Code introducing temporary tax breaks for livestock breeding.

Recently, tax preferences for agriculture have been received as rarely as for other industries. Subsidies to agricultural producers are provided either in the form of loans or through direct transfers of cash subventions from the budget. All other proposals - on the introduction of investment incentives for agricultural producers or exemptions on excise taxes on diesel fuel, annually lobbied by both deputies and the Ministry of Agriculture - have traditionally not received support. First of all, thanks to the consistent resistance of the Ministry of Finance.

The amendments to the law signed by the president violate this unwritten rule. The amendments provide for an exemption from value added tax for three years from January 1, 2007 on the import of breeding cattle, breeding pigs, sheep and goats. In addition, seeds and embryos of breeding domestic animals, breeding horses, as well as breeding eggs will be imported with zero VAT. The exemption applies not only to agricultural producers or individual entrepreneurs-farmers, but also to those who import animals under leasing.

Currently, until the law comes into force (a month after its publication), when importing breeding stock into Russia, breeders pay VAT of 10%. For producers, this is an additional financial cost; the average cost of one breeding animal reaches 1,700-2,000 euros. Because of this, in particular, selection in domestic livestock farming is poorly developed. Meanwhile, within the framework of the national project “Development of the Agro-Industrial Complex” it is envisaged to increase the production of milk and meat by 7% and cattle by 11%, which is hardly achievable without increasing the genetic potential of animals.

According to the head of the State Duma Committee on Agrarian Issues, Gennady Kulik, by the beginning of the 90s of the last century there were 57 million heads of livestock in Russia, and now there are 24 million left. Already this year it is planned to bring 50 thousand heads of breeding cattle into the country under leasing. As the State Duma Committee on Agrarian Issues assures, during the three years of validity of the provision on the abolition of VAT on the import of breeding livestock, the shortfall in income to the federal budget will be compensated by an increase in the production of milk, meat and the total number of highly productive livestock, and will also lead to a decrease in livestock prices in general.

Irina SKLYAROVA