Raising excise taxes on alcohol threatens investments in the brewing industry, warns the Association of producers.

The unexpected increase in excise taxes on ethyl alcohol, strong alcohol, cider, mead, and beer may lead to the freezing of investment projects in the brewing industry. Currently, it is estimated that the amount of projected investments is 33.5 billion rubles. This was reported by the Association of Beer, Malt, and Beverage Producers, which unites the largest producers of brewing products - AB InBev Efes, "Baltika," "United Breweries."

According to the latest data from Rosstat, stable tax policies and government efforts to whiten the market in recent years have had a stabilizing effect on the brewing industry. Production of legal beer increased by 9% in eight months, and budget contributions increased by 18.2%, noted the union. However, the proposed sharp increase in excise taxes may have a reverse effect, as seen in the experience of 2009 when the industry shrank by 40% and the shadow market grew by 15-20%.

According to the proposed changes to the Tax Code, which were introduced in the State Duma as part of the budget package, an increase in excise rates on ethyl alcohol, strong alcohol, cider, mead, and beer is planned for next year. For example, the excise tax on beer with an alcohol content from 0.5% to 8.6% is proposed to increase from the current 26 rubles to 30 rubles per liter. In the following two years, the excise rate could rise to 31 and 32 rubles per liter. Excise taxes on beer with a strength of more than 8.6% will be 56, 58, and 60 rubles per liter in the next three years, according to the current Tax Code.

This increase in excise taxes is the main risk for the brewing industry. The revival that has only recently begun in the industry could be replaced by a great depression, warned the Union of Russian Brewers. If excise taxes are sharply increased, it will "eat up" almost all the producers' profits unless they transfer the costs to retail beer prices, said the Union's chairman, Daniil Briman. This could lead to a crisis in the industry, as producers will not have enough funds for development or even for maintaining equipment in working order.

The Association of Beer, Malt, and Beverage Producers has put forward a number of proposals that could positively impact the industry and increase the revenue side of the budget. This includes annual indexation of excise rates in line with forecasted inflation, an increase in duties on imported beer, setting low excise rates for low-alcohol beer, and providing various support measures to stimulate investments.