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. Last Updated: 07/27/2016

Tax on Russian Vodka Cut

Prime Minister Victor Chernomyrdin has signed a decree lowering the excise tax on domestic vodka and hiking the import tax on alcoholic beverages, according to Interfax.

The new document, signed Tuesday, brings down the excise tax from 90 percent to 85 percent, which actually means a decrease from 900 percent to 567 percent because of the peculiar way Russia calculates its excise taxes, according to an executive at Rosalko Concern, which unites most Russian distilleries and pure alcohol factories.

The figures cited in the prime minister's decree must be put into a formula to derive the actual tax.

A bottle of domestic vodka will now cost about 2,000 rubles (about $1.30), down from 3,000 rubles.

The government's decision follows the closure last week of Moscow's Kristall factory, Russia's biggest distillery. The factory, like many other Russian distilleries, had to close down because consumers preferred low-taxed imported vodka.

That happened after the government raised domestic excise taxes to 900 percent from 567 percent in the middle of December. Vodka production plummeted in January by 55 percent compared with January 1993, the Segodnya daily newspaper reported.

It also accounted for most of January's 22 percent inflation rate, according to Andre Illarionov, a former government economist.

Another Rosalko official, who spoke on request of anonymity, praised the decision. "We are pleased the government made an absolutely correct and quick decision in this case."

The Rosalko official said in this case the government had found a balance of the state's and industry's interests.

The new tax will come in force the day of the publication, said a Rosalko official.

The excise rate for domestic liqueurs was lowered from 900 percent to 400 percent change.

Chernomyrdin increased excise taxes for imported alcoholic beverages to 300 percent from 100 percent. Together with other duties, spirits importers will have to pay 450 percent in taxes on a bottle of liquor.

Ewald Wincer, a commercial director of LivAs joint venture between the St. Petersburg distillery and the German A. C. Asmussen distributor, said that he will be able to lower his price by 40 percent, boosting sales.

But Francis M. Presgurvic, managing director of a Swiss-owned company WhiteBear Trading Ltd., doubted that Russian producers would be able to meet domestic demand and suggested the higher import excise taxes could lead to a shortage.

An expert with Kristall, who refused to give her name, said her factory produces 80 million liters of vodka annually and her plant cannot expand because of the city bureaucracy.