Russian Government to rethink tax hikes?

Following the release of recent figures showing Russia’s illegal vodka market is overtaking legitimate production, the country’s government may be rethinking planned future increases.

The Moscow Times has reported that the Russian Government could be rethinking future tax hikes on spirits

Data compiled by Russia’s Federal State Statistics Service released this month revealed that the country’s illegal vodka market accounted for 55% of the entire vodka market in 2013, while legal production of the spirit declined 17%.

The legal vodka market as experienced a loss in business since the state increased the minimum retail price of vodka from 170 rubles (US$4.72) to 199 rubles (US$5.56) for 500ml bottles on 11 March.

The policy was introduced in order to combat the country’s widespread alcoholism problem, despite a recent survey showing that over half of Russian consumers claim not have bought vodka in a six months period.

However, The Moscow Times recently reported that Russian Prime Minister Dmitry Medvedev has ordered the Finance Ministry to explore the issue of freezing or lowering the excise tax on spirits with alcohol content over 9%.

Under the existing tax plan, the excise duty should rise a further 20% in 2015 and 10% in 2016.

The State Statistics Service also released figures in February this year showing that Russian retailers sold 9.9 million more litres of whisky than was imported into the country in 2013, meaning the black whisky market could be worth £230m.

The alcohol market has experienced several difficulties in Russia over the last few years with bans on advertising alcohol in the streets, on the internet and mass media, as well as the prohibition of selling alcohol after 11pm.