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State Submits Bill to Triple Taxes on Beer

The government, seeking to plug holes in the federal and regional budgets, has submitted a bill to lawmakers that would triple the excise tax on beer next year and double a transportation tax.

The measures also come amid a Kremlin-led campaign to curb rampant alcohol consumption, and they drew heavy criticism from brewers, including foreign companies that have rushed to build market share in the country’s rapidly expanding beer market.

“It’s not good news for the total beer market in Russia and as such not good news for Carlsberg,” chief executive Joergen Buhl Rasmussen said by phone. “But this is still a long process. It’s not a given that the proposal will pass looking like this. We’ll still make our voice heard.”

The package of tax hikes would also increase duties on cigarettes. The government said the increase to the transportation tax, in place since 2003, would help regional governments with their budgets.

The government approved the law Sept. 23, Interfax reported.

The excise tax on beer will be increased by an average of 50 percent per year from 2010 until 2012. Currently, the rate for beer with an alcohol content of 0.5 percent to 8.6 percent is 3 rubles per liter, which would increase to 10 rubles by 2012, according to the proposals, Interfax reported.

Carlsberg, which has 41 percent of the Russian beer market, said in a statement that the bill would increase the excise duty on beer by 200 percent in 2010, by 11 percent in 2011 and by 20 percent in 2012.

For wine and other low-alcohol beverages, the rate will increase by an average of 30 percent per year over the same period. The excise tax on hard alcohol would be increased just once — by 10 percent — in 2012, RIA-Novosti reported.

Carlsberg, whose Russian brands include Baltika, slid as much as 7.1 percent in Copenhagen trading, reaching a two-month low. Russia is raising taxes on beer and clamping down on its availability to curb what Medvedev has called the country’s “colossal” alcohol consumption.

“This is negative for Carlsberg,” Jyske Bank analyst Jens Thomsen said. “It could hurt the size of the Russian beer market and Carlsberg’s earnings on that market. It will be hard to pass the added costs on to the consumers.”

The brewer said it would “continue to argue for a more balanced increase of excise duty” and “encourage the involved politicians in Russia to pay attention to the arguments.”

“If the duty rise is dramatic, it will have a negative impact on the market and on Carlsberg,” said Anton Artemyev, head of Baltika. “I wouldn’t speculate on the impact, but it’s negative.”

(Bloomberg, MT, Reuters)

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