The production of vodka in Russia and the budget revenues from excise taxes are on the rise

The following year, the government will struggle with alcohol-containing liquids.
2016 was a landmark for the alcohol industry. Legal vodka production grew for the first time in three years: to 71.3 million decaliters, or by 15%, according to the Union of alcoholic beverages manufacturers (SPAP). "Judge yourself: in 2003, the country legally sold 132 million decaliters of vodka, and in 2015 - only 62 million," — the SNAP president and vice-president of the Russian Standard holding, Igor Kosarev, sounds obviously shocked. In 2013-2015, the reduction of official sales in some areas reached 60%. Manufacturers attribute this to excise duty: in 2013 it almost doubled and during the past two years was at the level of 500 rubles per liter of absolute alcohol.

In 2017 it will be 523 rubles.

Budget revenues from spirits grew from 2012 to 2014, and in 2015 fell by 15%, amounting to 146.2 billion rubles. Manufacturers directly attribute this to the increase in the shadow market.

In February 2016, the government began to sweep the market: the Federal Tax Service and the Federal Security Service conducted checks at distilleries in Kabardino-Balkaria and in the office of the vodka distributor "Status Group". There were no tax claims against the latter company. The problem was precisely in the plants: they indicated in the Unified State Information System (EGAIS) significantly more products than in the declarations, and accumulated a debt of 24 billion rubles.

The situation with the sale of alcohol without paying excise duties is over, said a spokesman of Rosalkogolregulirovaniye (RAR). Alcohol production in Kabardino-Balkaria was stopped, the head of the republic Yury Kokov stated in November.

Full Accounting

An important event was also a connection of the wholesale and retail level (as of January 1 and July 1, respectively) to the Unified State Automated Information System. Implementation of the system from production to sale to the consumer led to a reduction in the proportion of illegal alcohol, said the representative of RAR. The system was launched successfully without major disruptions, believes the chairman of the board of PJSC "Synergy" Alexander Mechetin. Information from EGAIS can be a good basis for the analysis of the market.

And in October, the Finance Ministry came up with a new excise tax allocation scheme. Since 2017, the federal government will return to the regions not 40%, as now, but 50% of the excise revenue. 10% of the money from the excise tax is divided among the regions in proportion to the retail sales, and 40% - in proportion to the production in the region.

The strategic idea of the govenrment is the inclusion of regional authorities in monitoring the legality of the market, says Kosarev; the new distribution system can be most effective in combination with EGAIS: only the regions could actually control the sale of alcohol through this system.

"Boyaryshnik" and President

In December, in the Irkutsk region the baths fluid called "Boyaryshnik" caused the death of more than 70 people. The President issued instructions concerning the tightening of control over alcohol-containing liquids. More than half of them (a total of 20 million daL of medical and 45 million daL of household and perfume and cosmetics fluids, according to TSIFRRA) is used as a substitute for alcohol. Price per one liter, in terms of vodka, is 100 rubles, says the director of TSIFRRA Vadim Drobiz and a half-liter bottle costs at least 190 rubles.

Until March 31, the government should make a proposal to amend the excise rates in order to reduce the demand for alcohol substitute. Manufacturers believe that it is necessary also to reduce the rate of excise duty on legal alcohol: by 35-50%. So far, this option is not  being considered, says the Deputy Prime Minister Alexander Khloponin.

Now the wholesale and retail sales of dual-use liquids are not licensed, not limited, not declared and not taken into account in EGAIS. The first step to control has been made, however: since January 1, 2017, the production of pharmaceutical substances to be taken into account in EGAIS, reminds Kosarev; the excise tax on vodka level is likely to be increased.