Russia’s Finance Ministry is considering a complete abolition of value added tax (VAT) on gold purchases, a move that would give Russian savers an option of investing in gold, rather than foreign currencies, Izvestya reports.
The ministry said earlier the measure could also help to return capital worth tens of billions of rubles to the country.
Gold bar buyers in Russia are currently obliged to pay a regular 20 percent VAT rate. However, when selling ingots, the tax is not returned. As a result, the demand for gold investment in the country sits at just under 3 tons per year. Experts say that if the tax is dropped, demand could skyrocket to 50–100 tons.
The abolition of VAT will create an investment gold market in Russia, Sberbank Vice President Andrey Shemetov told the newspaper. According to him, as a financial instrument, gold is protected from inflation, and at a time of geopolitical risks, the metal could be “an excellent substitute for traditional investments in U.S. dollars.”
Resetting the VAT on gold bullion could support the idea of de-dollarization of the Russian economy, said Aleksey Panferov, deputy chairman of the board of Sovcombank. The inclusion of impersonal metal accounts in the deposit insurance system could become another important step in that direction, he added.
According to the World Gold Council, demand for gold in Russia in 2018 was 2.8 tons. In China, it reached 304.2 tons, in India – 162 tons, and in Germany – 96 tons. Compared to 2014, demand in Russia has dropped almost three-fold. A significant increase in demand for gold was recorded in China and Kazakhstan after their abolition of the tax.