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12 Aug, 2009 18:42

Excise hike to drive beer lovers to bigger budget contribution

Beer drinkers are facing a sharp price rise, with the government planning to triple excises. But brewers saying higher duties could drive beer lovers to stronger drinks.

It’s a simple logic – if the government triples excise duties, it should raise three times the tax revenue. That’s one reason why the Russian government is mulling the idea of raising the beer excise from – 3.3 roubles per litre to around 9 roubles.

But Natalya Zagvozdina, Head of Research at Renaissance Capital, says simple maths doesn’t always work.

“In short I don’t think it will result in the triple increase in the collection of excise. In fact I don’t think the chances of that happening – of this big excise increase for breweries product – is very high. I think its an extraordinary increase, and it will hurt the industry, and I think consumers, more than benefit, in the short term, the budget.”

Brewers say the government should not be so harsh on them – as they pay their excise duties in full – unlike the producers of strong alcohol and vodka. Daniil Briman, Chairman of the Union of Russian Brewers, says cracking down on unlicenced spirit production could get the Government more.

“According to Rosstat and independent experts, around 50 per cent by value, of strong alcohol sold on the market, is either counterfeit or produced without paying excise or any taxes. Experts say that if we remove this black market in strong alcohol, then the government would gain more money than it would by increasing excise on beer."

Brewers have four months before higher duties are due to kick in. Analysts say beer producers will have to prepare for a drop in beer consumption of up to a third – losing customers to other beverages with a bigger kick.