Ministry of Finance of Russia to Raise Consumption Tax on Tobacco & Alcohol

On June 9, 2010, Deputy Finance Minister of the Russian Federation, Mr. Sergey D. Shatalov announced that the Ministry of Finance of Russia proposed to raise the tax on cigarettes by 1.3 times and that on spirits by 2 times from 2011 till 2013.

Relevant draft bill has been drawn up by the Ministry of Finance, which is now going for countersignatures with other authorizes concerned.

If this bill is passed, the consumption tax on spirits will be gradually raised to ROUBLE 650 per liter in 2013 from current ROUBLE 210 per liter, while that on filter cigarettes to ROUBLE 590 per thousand cigarettes in 2013 from current ROUBLE 250 per thousand cigarettes.

It is generally believed that this move aims at increasing revenue and reducing deficit. Previously, the Ministry of Finance announced to narrow the deficit to 4%, 3% and 2% from 2011 till 2013.

However, according to the opponents, the big raise in the consumption tax on spirits will jack up the bottom price of spirits, which may lead to hootch purchases by low-income groups and thus stimulate the market of illegal liquor.