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. Last Updated: 07/27/2016

City Will Introduce 2% Sales Tax in July

Muscovites will start paying a 2 percent sales tax July 1 and the tax will double to 4 percent next year, the Moscow City Duma decided in a vote that upset a City Hall already riled over lawmakers' refusal to pass a higher sales tax.

In a bill spelling out how to implement the city's sales tax law, the Moscow City Duma on Wednesday authorized a 4 percent tax starting July 1 but gave merchants a 50 percent waiver until Jan. 1.

Legislators said the gradual introduction will ease the pain of the tax and allow city tax collectors to familiarize themselves with the system.

The pain will instead be felt by City Hall, which angrily said Thursday that it will lose 1.5 billion to 2 billion rubles of desperately needed revenues because of the gradual introduction.

"This is not economics. It's not finances," said Valery Zharov, first deputy head of City Hall's economic policy and development department. "These are some sort of games."

The waiver also rubs salt into an old wound. City Hall had already compromised with the City Duma by agreeing to drop its demand for a 5 percent sales tax, the maximum amount allowed by federal law. Lawmakers had wanted a 2 percent tax.

"Yes, we have a balanced budget, but at what price?" Zharov said. "We already have postponed an increase in pensions, cut our street repairs to a catastrophically low level and drastically reduced money on housing maintenance."

The federal government passed a law last year allowing cities across Russia to implement sales tax laws, and Moscow follows a handful of cities in adopting the tax. St. Petersburg early this year introduced a 5 percent sales tax.