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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

Thursday, Jan. 29



Attend a master class on how to deal with complicated business negotiations today at the International Banking Institute, 6 Malaya Sadovaya Ulitsa. Running from 3 to 6 p.m., Vadim Sokolov, an assistant professor at the St. Petersburg State University of Economics, will introduce aspects of managing the negotiation process and increasing its effectiveness. Attendance is free with pre-registration by telephone on 909 3056 or online at www.ibispb.ru



Celebrate what would be writer Anton Chekhov's 155th birthday at the Bokvoed bookshop at 46 Nevsky Prospekt. Starting at 5 p.m., the legendary author will be feted with readings of his stories and short performances based on his plays by various St. Petersburg actors. Chekhov's books will also be offered at a 15% discount during the event.



Friday, Jan. 30



The Lermontov Central Library, 19 Liteyny Prospekt, will screen 'Almost Famous’ in English with Russian subtitles at 6:30 p.m. Cameron Crowe's Academy Award-winning comedy from 2000 stars Billy Crudup, Kate Hudson, and Patrick Fugit, and tells the story of a budding music journalist at Rolling Stone magazine in the 1970s. Admission is free.



Meet renowned Russian poet, journalist and writer Dmitry Bykov, famous for his biographies of Boris Pasternak, Bulat Okudzhava and Maxim Gorky, and winner of 2006 National Bestseller Award. Bykov will read old and new poems as well as answer questions about his works at the St. Petersburg Philharmonic, Main Hall, at 7 p.m. Tickets start at 1,000 rubles and are available at city ticket offices and the from the Philharmonic website www.philharmonia.spb.ru.



A retrospective of the films of Roman Polanski starts today at Loft-Project Etagi, 74 Ligovsky Prospekt, with a screening of ‘Repulsion’ at 7 p.m. and ‘Rosemary’s Baby’ at 9:15 p.m. The series runs through Feb. 4 and will include Polanski's eminently creepy ‘The Tenant,’ the cult comedy ‘The Fearless Vampire Killers’ and ‘Cul-de-sac’ among others. Tickets are 150-200 rubles and the complete schedule is available at www.vk.com/artpokaz/



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