After years of consideration, Russia, one of the world’s top gold producers, is once again planning to abolish the value-added tax (VAT) on gold purchases, starting from 2020, Reuters reported.
A group of Russian lawmakers have submitted the draft bill to the Duma, the lower house of parliament, proposing canceling the VAT starting from Jan. 1, 2020, the official website for draft bills showed on Tuesday.
The plan, part of a broader Russian program to support domestic gold demand, was a matter of debate among Russian officials for years due to concerns over potential budget losses. In February, they agreed on the need to go ahead with the project.
Russia has been steadily building its gold reserves as it tries to lower its dependence on the dollar in trade. The country has provided an example of how a sizable economy with the world’s fifth biggest international reserves can minimize dollar assets and still do well. So far, it doesn’t have many followers, but gold buying by central banks is going up, analyst Leonid Bershidsky argues in an opinion published by Bloomberg.
Since being hit by sanctions for its aggression against Ukraine in 2014, Russia has had good reasons to rethink the composition of its international reserve,. While the European Union hasn’t toughened its sanctions for almost five years, the U.S. has been doing it all the time. The Kremlin and the Bank of Russia consider the risk of further restrictions unpredictable and dependent more on U.S. domestic politics than on anything Russia does. In the 12 months since the end of September 2017, the central bank has more than halved the dollar’s share in its international assets and sharply increased the shares of the euro and the renminbi, Bershidsky writes.