Representatives of the Kremlin said the measure would significantly support the country’s meat and dairy producers, and encourage them to make additional investments in their businesses.
MP Arkadi Ponomarev, one of the draft law authors, said the genetics and breeding sector of the Russian meat industry was facing several challenges, so a tax reduction should improve the situation.
“One-time payment of tax for farmers has been bringing significant impact on the financial positions of most companies. For example, at an average cost of breeding cattle of EUR2,500 per head, VAT accounts for EUR 250 per head,” said Ponomarev.
He added that the reduction in tax on farmers would support the industry, especially the cattle segment, where beef production has gradually declined.
Access to the best
Previously, VAT on breeding cattle was abolished between 2008-2012, during which time the population of breeding cattle rose by nearly quarter. VAT was reintroduced in 2013 and the cattle population started to fall. Between 2013-2016, the size of the breeding cattle herd in the country reduced by nearly 70,000 heads.
“We believe that zero rates of VAT on the import of foreign breeding materials will enable Russian manufacturers to use the best samples of the world’s gene pool to create their own highly productive livestock,” said Ponomarev.
The issue of VAT on breeding cattle is also crucial in neighbouring Kazakhstan, which has a common custom space with Russia within the Eurasia Economy Union. According to the head of the Meat Union of Kazakhstan, Maksut Baktibaev, the government has recently demanded farmers pay KZT500m (US$2m) of VAT on breeding cattle, saying that the introduction of lowered rates in 2010 was incorrect.
“In 2010 they [government] told us that we will import breeding cattle in 2010-2014 without paying VAT and this should become the measure of state support. In 2015 the system has been changed, and recently the Ministry of Finance starting to demand agricultural producers to pay the fees entirely for this period,” he says.