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Medvedev Prepared to Lower Taxes to Save Russian Vodka

Published: April 28, 2014 (Issue # 1807)



  • Vodka has indeed become more expensive, but the measures have had an unintended side effect.
    Photo: Vedomosti

As the rising price of vodka drives Russian consumers toward illegal products and Kazakh imports to quench their thirst, the government may halt further tax hikes that were intended to combat endemic alcoholism.

Prime Minister Dmitry Medvedev has ordered the Finance Ministry to explore the issue of freezing or even lowering the excise tax on spirits with an alcohol content of over 9 percent, Interfax reported.

"This decision would require tax losses; it would be very painful for us," Deputy Finance Minister Sergei Shatalov told RBC, adding that the pace of tax increases could be slowed all the same.

The national alcohol excise task rose 33 percent in 2013, the largest increase in modern Russian history, and a further 25 percent this year, pushing the lowest retail price for a half-liter bottle of vodka up to about 250 rubles ($7). The minimum legal resale price also climbed to 199 rubles ($5.50) in 2014 from 125 rubles ($3.50) in 2012.

Under the existing tax plan, the excise duty should rise a further 20 percent in 2015 and 10 percent in 2016. By 2017 the increase will slow to 4.5 percent, or about the level of inflation.

Making alcohol less affordable was an explicit element of the Russian government's plan to lower citizens' alcohol consumption, according to a convention signed by President Vladimir Putin in 2010.

At that time the government pledged to cut Russians' alcohol intake by 15 percent by 2012 and 55 percent by 2020 while "liquidating" the market of illegal alcohol.

Vodka has indeed become more expensive, but the measures have had an unintended side effect.

"By my estimate, more than a third of consumers are unable to buy vodka at this price. This means that they are generating a demand for illegal products," Dmitry Dobrov, chairman of the Union of Alcohol Producers, told RBC.

Illegal vodka accounted for 55 percent of the entire vodka market in 2013, Igor Kosarev, vice president of distiller Russky Standart, told Kommersant.

Just as illegal vodka is pouring into the market, so are imports from Kazakhstan, where alcohol is significantly cheaper on account of lower excise duties, Dobrov said.

Kazakhstan doubled its excise tax this year, but the current rate of 38.8 rubles per half-liter bottle ($1.08) is still three times lower than Russia's tax.

In 2012, the Finance Ministries of Russia, Kazakhstan and Belarus — the three countries of the Russia-led Customs Union — agreed to synchronize their excise taxes on alcohol and cigarettes, Shatalov said.

"Unfortunately, these agreements were not put down in any documents. We did not manage to sign an intergovernmental agreement, and Kazakhstan has taken a rather tough stance," he said.

Total legal vodka production in Russia fell 12 percent in 2013, according to the Federal State Statistics Service, and is still plummeting. From January to March this year, legal Russian enterprises produced 10.8 million decaliters of vodka, 17 percent less than in the same period last year.





 


ALL ABOUT TOWN

Saturday, Dec. 20


The city’s Babushkina Park on Prospekt Obukhovskoy Oborony will be invaded by dozens of rocking-and-rolling Santa Clauses during today’s Santa Claus Parade. Not only will they parade through the park but there will also be competitions amongst the festively-clad participants and a musical master class. There will also be a prize for the best-dressed Santa Claus.


Add to your record collection during the Vinyl Christmas Sale at the KL10TCH bar on Konyushennaya Ploshchad today. Spend the afternoon perusing the records for sale while listening the classic, clean sound of records spinning out hits from a variety of musical genres and time periods.



Sunday, Dec. 21


The Zenit St. Petersburg basketball team returns to the northern capital this evening for a matchup with Krasny Oktyabr, a Volgograd-based basketball club. Tickets for the game, which tips off at 6 p.m. this evening, can be purchased on the club’s website or at their arena, Sibur Arena, on Krestovsky island.


Satisfy your sugar cravings during Sweet New Year, an ongoing seasonal festival at the Raduga shopping center. Each weekend of December will welcome hungry visitors to taste hundreds of different kinds of desserts made from a plethora of sweet treats. Workshops are open to visitors and seasonal gifts can also be purchased for those rushing to finish their New Year shopping.



Monday, Dec. 22


Pick out the latest fashions as holiday gifts for loved ones or as early presents for yourself during the Christmas Design Sale at Kraft on Obvodny Kanal, starting on Dec. 20 and continuing through Dec. 27. Designer clothes will be on sale every day of the week or you can buy something more festive to decorate the home while sipping on hot coffee and perusing the various master classes.



Tuesday, Dec. 23


Meet Arctic explorers Fedor Konukhov and Viktor Simonov during SPIBA’s and Capital Legal Service’s event “Arctic Expedition” this morning in the Mertens House business center at 21 Nevsky Prospekt. The meeting will discuss the explorers’ ongoing eco-social project and how companies can use the project as a unique marketing opportunity. Email office@spiba.ru by Dec. 22 if you wish to attend.



Wednesday, Dec. 24


The Anglican Church of St. Petersburg we will be holding a Christmas Eve service at 7 p.m. led by Rev Wm. Shepley Curtis of the Episcopal Church. The service will be held at the Swedish Church at 1/3 Malaya Konyushennaya Ulitsa.



To have your event included in All About Town, email tot@sptimes.ru



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