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Higher Tax Would Double Vodka Price

The Finance Ministry plan sees the price of the cheapest vodka rising from 90 rubles now to 200 rubles in 2013. Vladimir Filonov

The Finance Ministry has proposed increasing the excise tax on hard alcohol, in a rate hike that would double the minimum vodka price to 200 rubles (about $6) per half liter by 2013.

The tax hike would mean that the price of the cheapest vodka would be increased from the current 90 rubles to 120 rubles in 2011, 160 rubles in 2012 and finally 200 rubles in 2013, Deputy Finance Minister Sergei Shatalov said Wednesday.

The ministry has recommended raising the tax next year to 330 rubles per liter from 210 rubles, and in 2013 to 650 rubles, State Duma Deputy Mikhail Blinov said, Kommersant reported Wednesday.

The tax hikes would lead to a 50 percent reduction in the market, Blinov said, estimating the measure’s chances of passing at 90 percent.

Vodka makers say that high consumer prices for distilled alcohol will lead to an increase of bootleggers and would devastate makers in the low-end price segment.

Last year, the government passed a similar tax hike on beer, raising the rate from 3 rubles to 9 rubles per liter. This resulted in a 15 percent drop in beer production in the country over the first four months of the year, compared with the same period last year, according to data from the State Statistics Service.

A report released last month by the New Economic School warned that relatively low taxes on vodka in Russia were responsible for the country’s heavy drinking and cut average life expectancy by 10 years.

Shatalov also said the excise tax on cigarettes could be increased by 30 percent per year over the next three years.

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