Russian Brewing Industry Suffers from Fiscal Problems

The Union of Russian Brewers is to sue a governmental official
Russian brewers are asking the government to provide fiscal concessions to them. Otherwise, Russians will stop drinking expensive domestic beer and turn to fake vodka and Azeri narcotics.

It just so happens that Russia can be proud of its beer, in addition to its oil industry. Russian tanks won't shoot, planes won't fly, the car industry is ruined. However, the sales of the Russian beer grow every quarter, while the beer import gets smaller. On the other hand, it seems that there is not much time left for Russian people to be happy about their beer: The government will not allow a lot of fine and cheap beer.

The Russian government is always pleased to fleece a developing domestic industry. Since the production and sales are growing, the Finance Ministry officials believe that it is about time that excise tariffs should be raised for them and hinder their development on the whole. What is the point of getting rich on beer, if pensioners starve in Russia? Deputies think that the mass consumption of beer is a negative factor, taking into consideration the fact that beer is an alcoholic beverage.

To all appearances, the government has a lot of claims on the Russian brewing industry. However, as it turns out, domestic brewers have decided to make the government happy a bit too. They decided to explain that there is neither development nor profit in the industry.

The Union of Russian Non-Alcoholic Beer Producers wrote a letter to Prime Minister Mikhail Kasyanov again: They want the premier to establish law and order in the fiscal and excise policy of the state. Beer producers suggested that Mikhail Kasyanov should set those problems forth at a session of the Russian government.
Brewing companies have their reasons for concern: The production tendency has been negative in the industry over the recent seven months. It was particularly said in the letter that, according to the results of the first quarter of 2003, production volume shrank by five percent and made up $140.1 million vs. the $147.3 million of the same period of last year. As beer producers evaluated, the budget of the state lost some $36.5 million.

Economists do not deal with excises - accountants do. This is the point of the problem. However, it is an economist who is capable of considering an industrial branch on the whole, not piece by piece. This is the origin of increased excises. In the aggregate with other taxes, high excises are capable of ruining an industry.

Beer is basically produced by small enterprises, not by such giants as Sun Interbrew, for example. There are 310 brewing enterprises in the Russian industry and 280 of them are small companies. Probably, the government believes that they are actually not needed, and that only ten large companies are capable of providing beer to the Russian population.

It deems that officials do not want to think of anything but money. The Healthcare Ministry may struggle with drug addicts and obtaining money for federal programs, but the Revenue and Finance Ministries take the money away. Yet, brewers say, beer is better than marijuana, and they are totally right. The purchasing capacity of the vast majority of the Russian population is extremely low, whereas the cost of beer is rather high. Domestic brewers believe that a lot of Russian consumers prefer low-quality fake alcohol, not to mention the matchbox of dope that can be found in any marketplace.

One should not to exaggerate the attention that domestic beer producers pay to people. They are businessmen, and their prime goal is to have their businesses up and running. If there is an official who wants to interfere with that, businessmen may run out of patience. On April 18th, 2003, the Russian Union of Brewers decided to sue Valery Gubanov - the chairman of the department for revenues of the alcohol and tobacco production of the Revenue Ministry. Valery Gubanov suggested the beer excise tax should be raised by 1.5 times.

To be on the safe side, wise beer producers decided to address the prime minister. They hope that Mikhail Kasyanov will do something about the problem, for elections are coming up. After all, they like beer a lot in Russia.