Analysis of and Improvements of Excise Taxation on Beer in Russia

Abstract

Excessive consumption of strong spirits in today’s Russia continues to generate a number of negative effects. This makes it highly relevant to change consumers’ preferences so that they choose low-alcohol drinks, wine and beer. Beer is the most promising drink in terms of its capacity to replace strong alcohol in the structure of consumption. Russia’s beer industry needs additional fiscal incentives. The purpose of this study is to analyze the taxation of beer in Russia and propose improvements to beer taxes. The authors proceed from a hypothesis that by improving the system of excise duties on alcoholic drinks in Russia by means of beer excise tax rates that vary based on alcohol content would make it possible to change the price structure of beer of various strengths. That would encourage consumers to shift their preferences in favor of lower-alcohol products. The research method includes the analysis of excise duty revenues in Russia as a percentage of total government revenue as well as the structure and dynamics of excise duty revenues in Russia by type of alcohol. Special attention has been paid to beverages with low alcohol content and beer. A comparative analysis has been conducted of beer tax rates in Russia and the EU. An unconventional market study has been done of beer sales points to get a picture of the beer sales structure by alcohol content. Highlights 1. The introduction of beer excise tax rates that vary based on alcohol content in Russia will bring down the price of lower-alcohol products and increase the price of higher strength beers 2. Price differentiation depending on alcohol content will encourage consumers to shift their preferences in favor of lower-alcohol beers 3. The proposed mechanism of calculating beer tax is more fair and rational both for brewers and consumers. From the state’s perspective, the changes to beer taxes would result in lower tax revenue, but would help preserve public health and reduce healthcare expenditures thanks to a decrease in the consumption of beer with high alcohol content For citation Iadrennikova E. V., Leontyeva Yu. V., Mayburov I. A. Analysis of and Improvements of Excise Taxation on Beer in Russia. Journal of Tax Reform, 2018, vol. 4, no. 2, pp. 142–156. DOI: 10.15826/jtr.2018.4.2.049. Article info Received June 20, 2018; accepted July 24, 2018