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Three-Fold Indexation of the Excise on Beer will Boost Alcoholization in the Country

Three-Fold Indexation of the Excise on Beer will Boost Alcoholization in the Country

On November 13 the State Duma of the Russian Federation approved in the third, final reading the federal bill On introduction of amendments in Chapters 22 and 28 of Part II of the Tax Code of the Russian Federation.

In particular, the bill provides for indexation of the excise rate on beer for 2010 by three times. At present the current excise rate on beer with normative (standardized) content of the mass content of ethyl spirits exceeding 0.5 and up to 8.6 percent inclusively amounts to RUR 3 per 1 liter.  In accordance with the bill, as of January 01, 2010 the excise rate on this category of beer is established at the level of RUR 9 per 1 liter, RUR 10 per 1 liter in 2011, RUR 12 per 1 liter in 2012.        

Representatives of the national brewing industry, adjacent industries of the economy, experts, and heads of several regions of the country have repeatedly stressed that the decision on the three-fold increase of the excise rate on beer is beyond compare and its implementation will inevitably lead to severe social and economic consequences.        

It needs to be noted that this decision is taken at the background of the decline in the brewing industry which, in accordance with the data provided by Rosstat (Russian Statistics Committee), based on the results of the nine months of the current year, accounted for 8% year-on-year. Yet in the current year several brewing companies had to stop their production and it lead to reduction of the number of employment positions. In case a final decision is taken with regard to increase of the excise rate on beer about one hundred specialists in the brewing industry and adjacent sectors of economics will lose their work places. The sector of small brewing in this country in the nearest two-three years will in reality cease to exist which also will make an input in the growth of unemployment in the country.         

Besides as a result of reduction of profitability of brewing production payments by enterprises of the industry of all basic types of taxes will considerably decrease.        

But, first of all, coming into effect of this bill will boost growth of alcoholization in this country. At the background of the shocking increase of the excise rate on beer, indexation of the excise rate on strong alcohol will only make 10 %. Such a disproportionate increase of excise will lead to considerable reduction of the price gap between strong alcohol drinks and beer and will create economic stimuli for a shift of consumer demand of the population towards strong alcohol, illegal produce and cheap surrogates.

Vyacheslav Mamontov, Chairman of the Executive Committee of the Union of Russian Brewers:       

“Now that the measures on reduction of the level of consumption of alcohol are being actively discussed, taking by the State Duma of the Russian Federation of the bill with regard to three-fold increase of the excise rate on beer looks illogical and inconsistent. In fact all conditions are created for a transition of the population to consumption of strong alcohol and surrogates. Now the bill will be considered in the Council of the Federation. Later it will be submitted for signature by the head of the state. Let us hope that senators and the President will give an unprejudiced assessment of suggestions contained in the document”. 

Press-Service of the Union of Russian Brewers

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