12:35 03.12.2015

Excisable goods producers believe duties proposed by Finance Ministry from 2016 are catastrophe

3 min read
Excisable goods producers believe duties proposed by Finance Ministry from 2016 are catastrophe

Producers of vodka, wine and cigarettes predict catastrophic consequences for the sectors if the excise duty is increased from 2016, and this will entailed the decline in production and payments to the national budget.

"This is not a reform. The increase of excise duty by 100% for strong spirits and by 150% for cognac is the elimination of Ukrainian producers and the absence of measures to bring the market from the shadows. There it simple statistics from the State Statistics Service: in 2014 the state increased the excise by 42.5% and they got 3% of growth [in payments to the budget] and a 25% decline in production," Director General of Ukrvodka Association Volodymyr Ostapiuk said at a press conference in Kyiv on Wednesday.

The association said that 100% growth of excise duty on alcohol will lead to halving of vodka production, and the price of a half-liter bottle of vodka would grow to UAH 90. As of early 2016, the half of alcohol distilleries would have to halt production, and tax payments will be cut by 50%, while the share of the shadow market would grow to 65%.

Director of the Association of Winegrowers and Winemakers of Ukraine Serhiy Mykhailechko said that the increase of excise duties by 50% will result in a dramatic decline in wine production and the reduction of payments to the budget by UAH 26 million.

"Growth of the excise duty in 2014 by 43% in combination with the loss of Crimea entailed the decline of 48% in production of wine," he told Interfax-Ukraine.

He said that now there are no grounds to increase excise duties on table wine. These steps of the Finance Ministry are not in line with the EU Directive on the structures of excise duties on alcohol and alcoholic beverages, according to which a zero rate is applied to still wine.

Director of the corporate department at JTI Ukraine Oleksandr Kohut said that the new increase of excise duties by 40% would lead to a rise in the prices of cigarettes by UAH 3.50-5 depending on the price segment. The average price will grow by 30%, to UAH 18.50 per package.

He said that demand on cheap illegal products would grow, and by the end of the year it could be 12-15% of the market. This means the loss of over UAH 4 billion of tax payments.

"The proposal to increase ad valorem of the excise duty by 50% is not in line with the progressive EU practices," he told Interfax-Ukraine.

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