Russia's Government is pressing ahead with its proposal to triple tax on beer from the start of 2010, according to Carlsberg, in a move that analysts believe could significantly damage brewers' profits.

A bill to triple excise tax on beer from January next year has been put before the State Duma, the country's parliament, by Government officials, Carlsberg said today (2 October).

Carlsberg's share price fell by around 6% following the brewer's announcement, reflecting concern that the group's high exposure to Russia's beer market means that a tax hike of such proportions would seriously affect profitability.

Carlsberg owns Russia's leading brewer, Baltika Breweries, which has around a 38% share of the country's beer market.

Trevor Stirling, analyst with Sanford C Bernstein, told just-drinks today (2 October) that Carlsberg would be most significantly hit by a tax rise, but that Heineken could also see a material impact on operating profits. SABMiller is less exposed due to its lower reliance on Russia for profits in the Central and Eastern Europe region.

If the tax is passed, Carlsberg would be forced to rapidly cut costs, yet the move could still wipe between 7.5% and 17.5% off the firm's global annual earnings before interest and tax, Stirling predicted.

"It's already gone a lot further than many of the brewers hoped it would," he said, but added: "There still remains a possibility that the Duma will amend the proposal in a way that favours the beer industry or that there is positive intervention from elsewhere in Russian politics".

It is believed the tax plan forms part of the Government's crackdown on alcohol-related harm, but critics say the hike has been devised to plug a hole in Russia's finances. Russia's gross domestic product (gdp) fell by a record 10.9% in the second quarter of 2009.

Carlsberg emphasised today that the tax proposal remains in draft form.

Anton Artemiev, senior vice president for Carlsberg in Eastern Europe and CEO of Baltika, said: "I find it very hard to understand the logic behind the disproportionate increase of excise duty on beer compared to strong alcohol (+10%) which will inevitably favour the consumption of hard alcohol, including vodka, and is bound to have a negative effect on alcohol abuse in the Russian society."

He said that tripling tax on beer will have "negative consequences" for the Russian economy as a whole.

Falling consumer demand in tough economic times caused Russia's beer market to shrink by 6.8% in volume terms in the first half of 2009, compared to the same period of 2008, according to figures given to just-drinks by Sun InBev, the local subsidiary of Anheuser-Busch InBev.

There is "deep concern" across the industry over beer tax proposals, Sun InBev president Tunc Cerrahoglu said during a recent press conference organised by the Russian Brewers' Union.

The tax will be discussed in the State Duma before passing to the Council of Federation. If endorsed, it would then be referred to Russian president Dmitry Medvedev for final approval and signing. This process could take several weeks, Carlsberg said.