RUSSIA: Sun InBev, brewers combat beer tax rise threat
Russia's Brewers' Union has warned the country's Government against a sharp excise tax rise on beer, as the industry ups the pressure on politicians ahead of debate on the 2010 Budget.
One of the draft proposals put to ministers is believed to include a plan to triple excise tax on beer from January 2010, as the Russian Government looks to reduce alcohol abuse and plug a hole in the country's finances.
There is "deep concern" in the industry over possible sharp tax rises, the president of Sun InBev, Tunc Cerrahoglu, said in a press conference organised by the Russian Brewers' Union this week.
"A sharp increase in excise duty wouldn't only affect the beer sector, but would also have serious consequences for the agriculture, retail, packaging, distribution and transport industries," he said, adding that Sun InBev estimates that 600,000 jobs rely directly and indirectly on the brewing sector.
According to the transcript of his speech, passed by Sun InBev to just-drinks today (14 August), Cerrahoglu said that it is "difficult to see the logic" in a tax hike, given that the Russian beer industry is already suffering alongside others in the economic downturn.
Most major brewers have reported a decline in volume sales on the Russian market in the last six months, in a previously fast-growing market.
The beer market shrank by 6.8% in the first half of 2009, compared to the same period of 2008, according to figures from Sun InBev, which is a division of Anheuser-Busch InBev.
Cerrahoglu said: "From one hand we hear the clear message of the Government to facilitate business development and therefore ensure stable level of employment and tax payments, from the other we are told about the prospects of three-fold increase of excise."
The Brewers' Union press conference came as the Russian Government announced that the national economy (gross domestic product) shrank by a record 10.9% in the second quarter of 2009; largely impacted by a fall in global demand for oil, of which Russia is a key exporter.
Earlier this month, Carlsberg also spoke out against beer excise tax rises in Russia. The brewer, which owns Baltika, Russia's leading brewer, attacked a proposal to raise tax on beer but leave vodka tax level.
"This is so illogical that it certainly requires a discussion and I'm sure that this discussion will take place," said Baltika president Anton Artemiev, during Carlsberg's half-year results conference.
However, Artemiev, who also heads Carlsberg's Eastern Europe division, added: "It remains to be seen what will happen. In the past, there has been every year a different number of proposals and, so far, the extreme one never went through."
Full-year beer market decline in Russia is likely to be 5-6% in volume terms in 2009, compared to a previously expected 2% fall, Carlsberg predicted.
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