In early June, the media reported possible increase in meat prices in Russia due to feed supplement (FS) importers being charged additional VAT on top of the preferential tax rate of 10%. Until April 1 2019, most FS importers were charged the usual rate of 20% (18% until January 2019), while nearly 20% of FS import enjoyed the preferential rate of 10% in 2018. In 2016, it was around 25%, but it began rapidly decreasing in Q1 2019, when the Federal Customs Service, followed by the Ministry of Finance, toughened the preferential rate requirements.

Between January 2019 and March 2019, 166 importing companies enjoyed the preferential rate. As of now, the total amount of additional VAT is reaching 1,9 bln RUB. VIC Group, Alltech and Mustang Nutrition Technology are expected to be charged the largest tax amount with 185.6 mln RUB, 184.2 mln RUB, and 154,2 mln RUB, respectively, which is nearly 28% of the total amount.

Moscow’s Germes has the highest number of products, for which the company might be charged additional VAT. Between January 2018 and March 2019, Germes imported 62 trademarks at the preferential rate, among which Kemzyme accounts for the highest import volume and highest additional tax amounts. However, the company only comes 6th among the companies that might be charged the largest tax amount, with 54.8 mln RUB. Elanco, veterinary department of Eli Lilly, has the lowest number of trademarks, for which the company might be charged additional VAT, since it imported only Hemicell at the preferential rate. Agro-Plus (Krasnodar Region), having imported only fat-containing supplements for energy deficit for the cattle Tripalmitin and Trilacta C-A at the preferential rate, is also on the safer side.

Most FS imports at the preferential rate accounted for FS for geese, the cattle, and swine, for which the total possible amount of additional tax might reach 1.75 bln RUB, or 92% of the total amount demanded. That could lead to the price increase in poultry meat as well.

Out of the 166 FS importers that might be charged additional tax, 48 are also importers of veterinary drugs, which means that the possible additional charges will have consequences for other veterinary markets, including the price increase in veterinary drugs.

Tab 1. Top 20 feed supplement importing companies that might face additional tax charges (2016 - 2018, Q1 2019) (EEU countries excluded)