Russia considers tax hike to double vodka prices

By Guy Montague-Jones

- Last updated on GMT

Related tags Vodka Tax Alcoholic beverage

The Russian government is considering a hike in vodka taxes so as to more than double the price of the country’s most famous drink by 2013.

Russia is threatening to impose tax rises after introducing a 200 per cent increase in excise duty on beer in January this year.

News wires reported today that Deputy Finance Minister Sergei Shatalov has proposed incremental tax rises on vodka over the coming years with the goal of more than doubling retail prices by 2013.

Tax proposals

Shatalov was quoted as saying that the strategy would increase the minimum price of a half-litre bottle of vodka from 89 rubles (€2.33) to 200 rubles over three years.

The minister explained that the tax would help ease the budget deficit facing Russia and combat its alcohol abuse problems.

Russia is currently looking at a budget deficit of 4-5 per cent this year and needs to find new sources of revenue to improve the health of its public finances.

Vodka may be an obvious target because of its revenue generating potential and association with public health problems but the tax proposal has not been universally welcomed.

Industry views

Industry experts have expressed concern that doubling prices would encourage illegal vodka production. The Financial Times reported that Vadim Drobiz, director of the Centre for Federal and Regional Alcohol Markets Research, told its sister paper Vedomosti that if the proposals are enforced then “the legal vodka market will virtually cease to exist”.

However, an increase in vodka tax may do something to redress the misbalance between vodka and beer prices that beer producers claim was created by the January tax changes.

At the time, Anton Artemiev, senior VP for Eastern Europe at Carlsberg said: “I find it very hard to understand the logic behind the disproportionate increase of excise duty on beer (+200 per cent) compared to strong alcohol (+10 per cent) which will inevitably favour the consumption of hard alcohol, including vodka, and is bound to have a negative effect on alcohol abuse in the Russian society.” will be running a follow-up article with more industry reaction to the Russian tax proposals. To send along your views, please email thl.zbagnthr-wbarf@qrpvfvbaarjf.pbz​.

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