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© RIA Novosti. Sergey Pyatakov

Vodka prices set to soar as treasury reviews its tax take

by at 24/03/2011 14:19

 

Vodka prices will rocket to 400 roubles ($14) for a half-litre bottle if tax-happy finance officials get their way.

At the moment the minimum price, laid down by law, is just 98 roubles ($3.50). Regulators decided to fix a price range in a bid to squeeze the market in illegally distilled spirits.

But those plans could be blown out of the water by the finance ministry’s ideas to rack up “sin taxes” and rake in the roubles from booze and cigarette sales.

 

Conflict of interests

Deputy finance minister Sergei Shatalov told Vedomosti that he expects plans to rake in a 1.9 trillion rouble ($67 billion) tax boost over the next three years will be agreed in April.

And part of those proposals revolve around an almost four-fold hike in alcohol duty by 2014, which would see the state’s share of a half-litre go from 46 roubles ($1.62) to 180 ($6.34).

But analysts fear this will damage an official programme to cut Russia’s dangerously high levels of drinking, which was adopted in 2009.

And it will fly in the face of the current pricing policies, which aim to drive out sellers of fake – and often unsafe – spirits.

“The state needs to understand what it wants more – to overcome drunkenness or end the black market,” said Vladimir Ivanov, head of the state distillers Rosspirtprom.

And he warned that raising prices would have little impact on consumption, but it would encourage bootleg sales as boozers looked for a cheaper alternative.

 

Tobacco charges

Cigarettes are also set for sharp prices rises as the treasury eyes smokers’ wallets as well.

The duty on 1,000 cigarettes will go up 60 per cent next year, to 448 roubles ($15.80), and by 2014 taxes will reach 873 roubles ($30.80).

However, that is still a long way below the European average of 64 euros per 1,000 cigarettes.

Many EU countries, particularly in Eastern Europe and the Baltics, have suffered from an influx of bootleg tobacco due to increased duty.

However, all the planned tax changes need to be approved by the government before any of them will be passed on to consumers.

 

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