Improvement of the procedure for application of VAT benefits in selling noble metals and gemstones

Abstract

The subject of this research is the procedure for the preferential treatment of VAT, sale operations with noble metals and gemstones established in the Paragraphs 9 and 10.3 of the Article 149 of the Tax Code of the Russian Federation. The exemption procedure, which is typical for such norms, has a number of peculiarities: it is not mandatory, since the taxpayer in accordance with the Tax Code has the right waive it and impose taxes on the same operations at the rate of 20%; it is not universal, since often granted to particular customers; it is not used by all taxpayers. Based on the example of noble metals at all stages of their promotion, since ore mining to sale of end products, the author analyzes different collection procedures of VAT (20% rate, exemption, 0% rate). Assessment is given to the effectiveness of application of preferential taxation procedures for noble metals and gemstones from the perspective of budget revenues, business operations, purchasing power, and compliance with the basic principles of VAT collection. For this purpose, the author builds the three models of VAT collection using the example of noble metals. The conclusion is made that the use of preferential procedures in the VAT calculation mechanism often leads to incompatibility of the interests of the state, business, and the end-consumer. Moreover, it contravenes the integral system of VAT collection, i.e. the principle of neutrality. Therefore, it is suggested to waive the privileges set in the Paragraphs 9 and 10.3 of the Article 149 of the Tax Code of the Russian Federation, and apply the rate of 20%. A number of additional recommendations were made on taxation of the end noble metal products.