The reduction of VAT did not lead to a decrease in food prices, according to the Institute for Market Studies and Analysis (IMSA).

Experts from the Institute of Forecasting and Macroeconomic Research (IPMI) have examined the impact and effects of lowering VAT from 15% to 12% on consumer goods prices.

Analysis was conducted based on the examination of price conditions in national supermarkets, as they are VAT payers and operate officially.

In particular, a data-scraping method was employed to gather statistical data over four months on 97 categories and 3754 types of consumer goods. The price changes in December-January for each product type (treatment group) were compared with the price changes in November-December and January-February (control group).

The results revealed that the reduction of VAT from 15% to 12% did not lead to the anticipated decrease in consumer product prices.

It was noted that the price changes in December-January were 0.3% higher than the changes in November-December and January-February. This indicates that prices, which were expected to drop by 2.6%, instead increased by 0.3%, excluding the influence of other factors.

The prices of 1115 goods across 46 groups (baby food, ice cream, pasta, body care products, etc.) remained unchanged.

Prices increased by 1% for 1306 goods in 20 groups (sweets, hygiene products, etc.).

Prices rose by 1-5% for 585 goods in 12 groups (laundry detergents, fruits, meat products, milk, etc.).

Prices decreased by up to 1.6% for 567 goods in 7 groups (stationery, sauces, coffee, etc.).

Experts identified three main reasons why the reduction of VAT did not result in lower prices:

— a significant share of the shadow economy in the consumer goods market, thus reflecting the effect of tax reductions on the relatively small profit margins of officially operating firms;

— insufficient formation of appropriate competitive conditions in the markets;

— increased influence of other key factors on prices (exchange rate of the dollar, etc.).

Previously, IPMI experts determined that lowering the VAT rate for 78 sectors of the economy would lead to reduced costs and, consequently, lower prices in the real economy sector. However, this did not occur in practice.