by Peter Schiff, Schiff Gold:
Russia is considering eliminating its value-added tax (VAT) on gold purchases. According to a Russian paper, this could increase gold demand in the country by 50 to 100 tons per year.
Russia currently charges a 20% tax on all gold bar purchases, and investors do not get the tax back when they sell their gold.
This is part of a broader move in Russia to minimize dependence on the US dollar and other foreign currencies. Deputy Finance Minister Aleksey Moiseev floated the VAT repeal last fall as a way for Russians to repatriate their capital.
You can see that the government is paying a lot of attention to capital repatriation. We have found that a lot of citizens want to repatriate their capital and invest it not into the banking system, but gold ingots. This is their right. The obstacle to this right now is VAT.”
According to RT, Sberbank Vice President Andrey Shemetov said lowering barriers to gold investment would give Russians an option to protect themselves from inflation. He added that in a time of geopolitical risks, the metal could be an excellent substitute for traditional investments in US dollars.
A second Russian bank official quoted by the Russian newspaper said eliminating the gold VAT supports the broader goal of de-dollarization.
As we reported last month, during a speech at the lower house of the Russian parliament, the CEO of the country’s key trading floor suggested Russian investors should replace investments they’ve made in dollars with gold.
“Let’s offer an alternative to the US dollar in the form of Russian gold, which we produce… investment gold,” Moscow Exchange (MOEX) CEO Alexander Afanasiev said.
Afanasiev said many super-conservative Russian investors have purchased dollars and they keep them “under the pillow thinking that it is the safest option out there.”
The Russian central bank has endeavored to reduce its exposure to the dollar over the last several years by buying gold and selling off US Treasuries. Russian gold reserves increased 274.3 tons in 2018, marking the fourth consecutive year of plus-200 ton growth. In February 2018, Russia passed China to become the world’s fifth-largest gold-holding country.
There has also been a movement to repeal taxes on precious metals in the US with several states considering bills during the current legislative session.
Fundamentally, gold and silver are money. But most governments treat precious metals as a commodity. They don’t accept it as payment. Worse than that, they tax it. Think about the absurdity of this policy.