MOSCOW, Dec 7 (Reuters) - Russia’s finance ministry is seeking to speed up cutting VAT on investments in gold in part to support a Russian gold refiner which has been struggling after it was hit by U.S. sanctions, Deputy Finance Minister Alexei Moiseev told Reuters.
The ministry said earlier this year it would propose cutting VAT on gold, and it is awaiting approval by the government on the issue which has been a matter of debate among Russian officials for years.
“We are striving to cancel (VAT) not only to increase the demand for domestic gold, although, of course, we are interested in filling (capacity of) refineries ... An additional reason is that some of them came under sanctions and thus lost the ‘good delivery’ status,” Moiseev said.
In April, Washington imposed sanctions on Russian businessman Viktor Vekselberg and his holding, which includes Ekaterinburg Non-Ferrous Metals Processing Plant, along with some other Russian tycoons, citing “malign activities” by Russia.
The London Bullion Market Association suspended the plant’s “good delivery” status, making it harder for the plant to access the London bullion market, the world’s largest.
“The experience of colleagues from China and Kazakhstan shows that they recorded an increase in demand for gold - and not by twofold but in much larger volumes - after the abolition of VAT.”
Moiseev does not see any risk of demand for gold in Russia exceeding supply as the precious metal can be imported if needed. The government does not currently see any reason to cancel Russia’s gold import duty, he added.
Another reason to reduce VAT on gold, Moiseev said, is that it would make gold more attractive for Russian businesspeople who want to repatriate dollar assets but don’t want to convert them into roubles.
“We have seen several requests from banks, in which they say that many of their customers are ready to de-dollarise, but for this they need a VAT-friendly regime of buying and selling bullion,” Moiseev said.
Banks have told the ministry they have many customers who would like to change their dollar deposits - the size of which exceed 1 billion roubles ($15 million) in some cases - to gold.
“These people would like to take their assets, for example, from Swiss banks and return to Russia, but they do not want to invest in roubles, they want gold.”
The ministry is also considering other measures to improve tax collection from Russia’s gold-to-jewellery industry and to clean up the market from gold scrap smuggled from neighbouring countries.
“Unfortunately, we do not have a real picture of how much gold is currently in Russia,” he said.
Industry analysts estimate that the size of the “grey” market in gold in Russia is dozens of times higher than the “white” market, Moiseev said, declining to give any data.
Referring to Russia’s state precious metals and gems repository Gokhran, Moiseev said it could increase purchases of gold to 2.5-3.0 tonnes a year from the current 2 tonnes. (Reporting by Darya Korsunskaya, Tatiana Voronova and Polina Devitt; writing by Polina Devitt; editing by David Evans)