Vodka production in Russia grows by one third

On June 13 the Ministry of Finance ordered the raising of the minimum price of vodka by five rubles to 190 rubles.

On June 13 the Ministry of Finance ordered the raising of the minimum price of vodka by five rubles to 190 rubles.

Mihail Mokrushin/RIA Novosti
Legal distilling increases as illegal operations are closed.

In April 2016 Russian distilleries produced 6.5 million decaliters of alcohol, which is 30.4 percent more than the same month the year before. In May it produced 6.3 million decaliters or 29 percent more, writes the Vedomosti business daily citing the Russian Federal State Statistics Service.

The sudden growth of production volumes is occurring after the suppression of an illegal production scheme in the North Caucasus. In February the representatives of the Federal Tax Service and the Federal Security Service conducted searches in 11 distilleries in the Kabardino-Balkaria Republic and the offices of low-cost vodka distributors Status Group and several wholesalers. These companies had registered significantly higher levels of production in the Unified State Automated Information System (USAIS) than in their declarations. This has led to an increase in unpaid taxes, which currently total 24 billion rubles ($37,600,000).

 

The deficit appeared in April and May when the excises for vodka produced in February and March were due. The collection of alcohol taxes from January until June 22, 2016 in comparison with the same period in 2015 has increased by 17.4 percent to 123 billion rubles ($1.925 billion). Over the last two years vodka taxes did not increase, although they doubled from 2011-2014.

One factor worth noting is that the universal introduction to the USAIS system began only in 2016. According to a source cited by Vedomosti, while illegal vodka used to occupy approximately 20 percent of the market, the legal market for the alcoholic drink will now grow by 15-20 percent and could reach 80 billion decaliters.

On June 13 the Ministry of Finance ordered the raising of the minimum price of vodka by five rubles to 190 rubles ($3). Victor Zvagelsky, a deputy chairman of the Economic Policy Committee in the Duma, thinks that the Ministry of Finance order will not have a significant impact in the campaign against counterfeiting.

First published in Russian in Kommersant.

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