OREANDA-NEWS. August 01, 2014. Sberbank’s Centre for Macroeconomic Research (CMR) published its report “Raising taxes: comparing alternatives.”

Increasing regional budget deficits and financing troubles will force the government to look for additional revenues.

CMR has analyzed the fiscal measures that are being discussed by the Ministry of Finance and the Government, which aim to increase regional revenue. The measures include the introduction of a 3% sales tax, removal of the salary cap for contributions to the compulsory health insurance fund, a VAT increase of 2ppt, and an income tax reduction to pre-crisis levels.

Each of the measures being discussed by the Ministry of Finance and the Government will have additional (negative) effects for the economy. The least painful consequences will be the increase in VAT, and not an increase in or introduction of new regional taxes.

“Our calculations show that an increase in VAT will contribute more to a decrease in revenue than the government’s other tax initiatives – i.e. RUB 375 bln. Other measures either provide a significantly lower tax effect or lead to more significant economic deceleration. However, the tax burden in Russia is rather high, and any increase in taxes will have consequences,” said CMR Director Yulia Tseplyaeva.