What are the plans of the government?
In ministries and departments on the instructions of the Deputy Prime Minister Dmitry Chernyshenko are exploring the possibility of introducing a special VAT regime for hotels and restaurants, as well as zeroing the property tax for “certain objects of tourist real estate in Sochi.” Who can become the beneficiary of the benefits and why is Russia’s domestic tourism chronically uncompetitive compared to other countries?
What the Deputy Prime Minister ordered
TourDom.ru learned that the government is working on the issue of tax benefits from an informed source referring to the order of Deputy Prime Minister Dmitry Chernyshenko, addressed to Ministry of Finance, FTS and Rostourism…
“With the participation of interested federal executive authorities, I ask you to work out and make proposals in the prescribed manner for amending the Tax Code of the Russian Federation in terms of establishing a special taxation regime for value added tax for enterprises of the hotel and restaurant industry and establishing a zero property tax rate for individual real estate objects of the tourism industry in Sochi “, – the source quotes the order of the Deputy Prime Minister. The deadline for it expired last working week.
Who are getting benefits?
Experts pay attention to the ambiguity of the wording at the disposal of the Deputy Prime Minister. It can be assumed that this is not about reducing VAT for all enterprises in the hotel and restaurant industry, but about the introduction of electoral preferences for individual companies in a particular city. Moreover, the text is drawn up in such a way that the thought of the existence of a certain list of candidates suggests itself. “How much does it cost to be included in such a list? Will there be a list of individual enterprises with higher taxes and how much does it cost to not be included in such a list? ” – Observers ask questions.
However, it is possible that theses about the introduction of a special regime for VAT and the zeroing of property tax for “individual objects” in Sochi turned out to be part of the same phrase at the disposal of the Deputy Prime Minister only by chance and not directly related to each other. A clause about individual tourist sites could appear due to different property tax rates in force in the largest tourist region – the Krasnodar Territory.
According to experts, large hotels of the coastal and mountain Olympic clusters in Sochi and the autodrome can become the beneficiaries of the benefits. Formula 1… Now they pay 2.2% of the cadastral value, while for organizations that own ski slopes, a zero rate is already in force in the Krasnodar Territory with a deferral of the introduction of the full rate for 2021. It is applied “for objects built in whole or in part at the expense of funds attracted in accordance with the loan agreements concluded by them with state corporations.” It is possible that we are talking only about eliminating the resulting disproportion, but the question arises about the reasons for such a selective approach to taxation of individual organizations in certain territories. So far, special benefits on federal and regional taxes on such a scale have been practiced exclusively for a number of oil and gas fields and large exporters of raw materials.
Why the attempts failed
If we talk about support in the form of a reduction in VAT tax, as well as other payments to the budget, then it is needed in the hospitality sector in all regions, especially for hotels in the largest cities that have lost foreign tourists, domestic excursion and business tourist flow.
Proposals to reduce VAT have been put forward more than once. For example, in June last year, the mayor of Moscow approached the government with an idea to halve payments for catering establishments. Sergei Sobyanin, however, the initiative did not find support from the Ministry of Finance.
In November, a group of Nizhny Novgorod deputies proposed to reduce the VAT for hotels and restaurants from the current 20 to 7%, but in February the State Duma rejected the bill they had developed.
In both cases, there was not enough justification for the proposed benefits. So, according to the conclusion The Accounts Chamber on the Nizhny Novgorod bill, if the VAT for hotels was reduced to 7% in 2021, the treasury would have received less than 7.9 billion rubles. “The sources of compensation for the shortfall in federal budget revenues have not been determined,” the document says.
In addition, a flaw was discovered: “The establishment of a reduced VAT rate only for classified hotels contradicts the basic principles of legislation on taxes and fees provided for in Article 3 of the Tax Code of the Russian Federation,” the conclusion says. State Duma Committee on the budget and taxes.
Experts are divided over whether the new attempt to lower VAT for hotels and restaurants will prove successful. One of the observers close to the government apparatus called this topic “impassable” and drew attention to the fact that the deputy prime minister had only instructed to “work through” the issue so far. The result will be the same as the last time – the Ministry of Finance will cut everything down.
However, experts from the hotel industry are ready to argue with officials.
Untapped Trillions More Billions Falling Down
According to the director Of the Center for Strategic Analysis and Development of the Tourism and Hospitality Union of Roman Yeremyan, now the VAT collected from hotels and sanatoriums is about 0.06% of the federal budget. In total, hotels in 2019 paid 58 billion rubles to the budget system. taxes and contributions to insurance funds, which also accounts for only 0.25% of the federal budget or 0.15% of the consolidated budget.
At the same time, according to the chairman of the Accounts Chamber of Russia Alexey Kudrin in 2018, 2019 and 2020, the government did not have time to spend 1 trillion rubles each. from the federal budget. And in the National Welfare Fund (NWF) as of January 1, 2021, there were 13.5 trillion rubles: this is 11.7% of Russia’s GDP, with a standard indicator of 7%. “According to the law, the NWF serves for large strategic infrastructure investments, replenishment of the deficit of the pension fund and the federal budget. A surplus of over 3.5 trillion rubles has already accumulated there. Why then collect taxes from industries that are still barely breathing? 8 billion of lost incomes with a decrease in VAT for collective accommodation facilities from 20 to 7% or 13 billion if it is zeroed, this is 0.06% – in the table of the federal budget this is just a statistical error, ”Roman Yeremyan cites the figures.
Vadim Prasov, vice president Federations of Restaurateurs and Hoteliers, also believes that there are chances to achieve a VAT reduction. The industry is among the affected and needs support. This is especially true of large hotels in large cities, which are the main payers of VAT, retain many jobs and, at the same time, have been working for a year with minimal income due to the decline in domestic and inbound tourism. Vadim Prasov calls the wording about falling budget revenues the standard phrase of the Ministry of Finance to justify the refusal. “If now we reduce the rate from 20 to 7%, then the number of VAT payers will increase. Therefore, budget revenues will grow, not decrease, ”the expert objected.
55% of the room rate is taxes
In addition, a state interested in the development of tourism needs not only to be guided by momentary interests in collecting taxes, but also to think about the future. In countries actively developing tourism, VAT ranges from 0 to 7% with a downward trend. The same goes for taxes on labor, property and profits. At the same time, the highest VAT rate for hotels and tourist infrastructure (20%) is only in Russia and Moldova.
This situation leads to the fact that, even before the pandemic year 2020, large Russian hotels – VAT payers showed losses or insignificant profits. “Analysis of the financial flows of such hotels leads to the conclusion that the total amount of revenues of the budgetary system reaches 55% of the final price of a hotel room for consumers, which makes the Russian tourist product hopelessly uncompetitive in comparison with foreign tourist centers popular with Russians and citizens of the European Union, where the total the fiscal burden on the price of staying in hotels and visiting entertainment facilities ranges from 3 to 10%, “Roman Yeremyan is relentless.
He calls the Russian VAT 20% for hotels an attempt by the state to “knock a trifle” off the affected industry: “This leads to the fact that under no circumstances can we compete in the international market, not only for foreign tourists, but even for our citizens. We are losing the fight dry and annually lose tens of billions of dollars in service consumption, billions of dollars in infrastructure investments and millions of jobs. ”
According to Vadim Prasov, the factor of the competitiveness of Russian hotels in the international market will become very important when the borders are opened. Reducing the tax burden will also help the development of domestic tourism. “Now a Russian is forced to pay a conditional 6,000 rubles for a hotel room, although he could have paid 5,000. Tourism should be more affordable. An increase in the number of long-distance trips will create more jobs, attract investment, and contribute to an increase in living standards, ”Vadim Prasov is sure.