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. Last Updated: 07/27/2016

New Rules on Alcohol Taxes Deal a Blow to Bootleggers

New rules on how the tens of billions of rubles collected each year in alcohol excise taxes are divvied up will help drive bootleggers out of the market and boost federal budget revenues, a leading industry expert said Friday.

Under changes that came into effect Jan. 1, excise taxes levied in the region where vodka and spirits are produced will no longer go to the local administration but straight to the federal budget, while taxes collected at excise warehouses in the region where the products are sold will be transferred to that region.

"This is positive news," said Pavel Shapkin of the National Alcohol Association. "It will sanitize the market and bring more money into the federal budget."

Previous legislation allowed local authorities to top up their coffers by restricting the sale of vodka and spirits manufactured in other regions.

"[The regional authorities] would distribute recommendation letters to retailers saying that they should have no less than 80 percent locally made vodka in their assortment," said Shapkin.

Authorities would also make it harder for distilleries from other regions to receive the necessary permits to sell their goods, he said.

Bottles of vodka and other spirits require with two excise stamps. One tax is paid at the point of manufacture while the other is paid at special warehouses located in the region where the liquor is sold.

Under the old rules, 25 percent of the excise collected from a region's distilleries and 25 percent of the excise from its excise warehouses went to that region's budget, while the remainder was transferred to the federal budget.

Forcing producers to cover regional demand and keeping distilleries out of neighboring regions encouraged bootlegging, Shapkin said, adding that letting legitimate producers ship their vodka to any region they want will give bootleggers "a kick in the teeth."