“What is the alternative to increasing VAT?”

An article by Mikhail Ershov, Principal Director on Financial Studies, Head of the Financial Analysis Department at the Institute for Energy and Finance, has been published on the website of Expert magazine: "What is the alternative to increasing VAT?” on the issues related to changes in taxation and monetary policy.

The VAT increase is a pro-inflationary factor. In addition, inflation expectations will increase. This will create conditions for maintaining a tight monetary policy. The stakes will be high for longer.

It is obvious that the increase in VAT and the cancellation of benefits for small businesses are the result of insufficient budget revenues in Russia. A deficit is expected in the coming years, and additional sources of financing are needed.

Similar problems have arisen in other countries. For many, it is solved by the participation of the central bank in the active purchase of its national government bonds. And this has been happening for many years.

This means that the central bank directly finances the expenditures of its country's budget, while creating new money. And this is logical. After all, the creation of a new GDP requires additional money, rather than delaying the existing ones that work in the economy.