The Ministry of Construction, through its public council, proposes to zero out VAT when replacing elevators

Plans to replace 40 thousand outdated elevators in residential buildings throughout Russia in three years are noticeably stalled, forcing the authorities to look for new ways to implement the program. Thus, the Ministry of Construction, through its public council, proposes to zero out VAT for these purposes. Otherwise, according to the authors of the initiative, regional authorities will need to find an additional 130 billion rubles, which is problematic given the current budget deficit in a number of constituent entities of the Russian Federation. Expert opinions differed. Some believe that during a crisis there is a high chance of receiving tax preferences. Others warn that in this case, regional budgets will lose a serious source of income.

Kommersant has obtained a letter from the chairman of the Public Council under the Ministry of Construction, Sergei Stepashin, to the head of the ministry, Irek Fayzullin, with an initiative to zero out VAT, which is currently 20%, when replacing elevators under the program for the overhaul of residential buildings. This will speed up the process of updating outdated equipment, the author of the appeal argues for his initiative. The Ministry of Construction did not respond to Kommersant’s request. However, according to Meteor Lift CEO Igor Mayorov, who was present at a meeting of the Federation Council on November 24 where the problem was discussed, the ministry supported the need for a tax break.

The overhaul of houses in general and the replacement of elevators in particular are financed from funds from special accounts where targeted contributions from homeowners are accumulated. They are not taxed, but if these funds are used for major repairs, VAT is paid on them. This, according to Mr. Stepashin, increases the owners’ costs for major repairs. He also points out that now there are not enough funds in special accounts to replace equipment in a timely manner, which also affects “the safety of millions of citizens.”

In three years, throughout Russia, it is necessary to replace 40 thousand elevators in buildings whose owners keep contributions in special accounts, notes the general director of the Russian Elevator Association, Pyotr Kharlamov. But in the absence of state support, this can only be done by owners paying increased contributions, for example, in Moscow, where the payment is 24.09 rubles. for 1 sq. m per month, explains the expert. The national average is 10.12 rubles. for 1 sq. m. Without direct support from the Russian budget, only the abolition of VAT when replacing elevators will not solve the problem, agrees General Director of Infoline-Analytics Mikhail Burmistrov.

The problem is aggravated by the rise in price of elevators, the average cost of which, according to Prime Life Development managing partner Denis Konovalenko, is now 1.5–2 million rubles, which is 50% more year on year. This was influenced by both the departure of Western manufacturers from the Russian market and the rise in metal prices, the expert explains. According to his calculations, currently replacing one elevator along with installation costs 2–3 million rubles. In addition, they add at the Shcherbinsky Elevator Construction Plant (part of Dom.RF), sometimes funds from special accounts are spent not on major repairs, but on current ones, which also increases the funding gap for the replacement of elevators.

Regional authorities will be forced to look for other ways to simultaneously replace all elevators, and this will be an additional burden on the budgets of the constituent entities of the Russian Federation by more than 130 billion rubles, warn the Public Council under the Ministry of Construction. And taking into account the costs of developing design estimates and installing an elevator, this amount could exceed 262 billion rubles, adds Vladislav Preobrazhensky, executive director of the Moscow Investors Club. Now the state of regional budgets is deteriorating and it is hardly worth counting on direct support from this source, notes Mikhail Burmistrov.

According to estimates of the Public Council under the Ministry of Construction, establishing a zero VAT rate when replacing elevators will involve more than 100 billion rubles in economic turnover. and will significantly load elevator factories with orders. In January-October 2023, their production, according to Rosstat, increased by 26% year-on-year, to 22.5 thousand units. But this is less than in pre-crisis 2021, when 26.7 thousand elevators were produced.

Now the authorities, as an anti-crisis measure, are zeroing out VAT for a number of industries, including ship repair, the tourism industry and the IT industry, so there is a chance to receive preferences when replacing outdated elevators, says Vladimir Khantimirov, managing partner of Asterisk. But Alexei Mostovshchikov, a member of the General Council of Business Russia, emphasizes that in this case the budgets of the Russian Federation and the regions will suffer losses, since VAT forms a significant part of the treasury revenues.

Daria Andrianova