The tax on the “hazard”: what products will rise in price due to entering of excises

Despite promises

Finance Minister Anton Siluanov on Saturday, February 6, confirmed that the excise duty on palm oil may be introduced in Russia already in the second half of 2016. “Working on the issue [about the size]. This is a measure which applies in a number of countries that seeks to reduce the consumption of harmful products and, on the other hand, increase the budget revenues”, — quotes the Minister “RIA Novosti”.

The day before, 5 February, Minister of agriculture Alexander Tkachev also said that the Ministry of agriculture supports an additional fee upon the sale of palm oil and soda water. “Today there is a proposal to introduce an excise duty on palm oil and soda, that is, the “harmful” products. If this happens, we from several sides at once Dodanim this topic”, — the words Tkachev “Interfax”. The Minister also added that counterfeit products, including with the use of palm oil is destroying the Russian food market: “We will fight”.

As reported in Friday’s newspaper “Vedomosti” with reference to the minutes of the meeting of Prime Minister Dmitry Medvedev on January 18, the Russian government is considering the introduction of excise duty on palm oil and sodas. In addition, the list of excisable products can get chips, electronic cigarettes, products with high content of fat and sugar. One of the interlocutors “Vedomosti” reported that the issue with oil is almost solved, the excise tax can be introduced from 1 July. Rate, according to the publication, may be about $200 per ton, or about 30% of the cost.

So, the government radically changed the attitude towards “tax harm” in the course of the month. At the end of 2015 a bill to impose excise taxes on “harmful” food to the Duma were brought by the Deputy from “Fair Russia” Oleg Mikheev: suggestions related to a soda and chips. The increase in the tax burden on manufacturers will result in reduced consumption of these products, which, in turn, will have a positive impact on public health, explained Mikheev. But then the government rejected the initiative, Recalling in its opinion (a copy dated 28 January, available) that President Vladimir Putin in the message to the Federal Assembly in December 2014 “noted the need for the next four years to freeze the existing tax parameters”.

Sunday, February 8, Mikheev re-introduce the bill to the state Duma, said a source close to the Deputy.

With palm oil are all relatively simple, because it is not produced in Russia, explains a government official, and it comes to the introduction of excise duty on palm oil as raw materials and not on products containing it. In regard to soda, according to him, it may result in more serious consequences, since according to the WTO rules, the excise tax must be uniform for all producers, including domestic ones: “If we introduce the conditional excise duty on Coca-Cola, and “Tarragon” will also have to establish the same excise tax”.

According to him, the lead Agency for study of the issue determined by the Finance Ministry. However, until a detailed examination, which is required for making changes to the Tax code, it has not yet reached, said the official. It will require much time and, most likely, will cause protests by domestic manufacturers, if it’s about soda and other “harmful” products. The Ministry of Finance will provide suggestions and calculations for excise tax on palm oil and products that are harmful to the health, within few weeks, reported TASS with reference to the representative office.

And tires too

Tires can also fall into the list of hazardous products that the government are going to impose excise. “Now is discussed only three items — palm oil, sodas and tires,” said a government official.

Chairman of the Board of the Association of manufacturers of tyres and General Director of “NokianTyres Russia” Andrey pantykhov said he knew about the possible imposition of excise taxes on tires — this is discussed in the government. In conditions of economic crisis, when new car sales decline and the purchasing power of citizens is falling, the introduction of excise tax will lead to a new rise in prices and a further contraction of the market, he warned, this will be followed by a reduction in staff and tax revenues.

The pantykhov also noted that the car is already the excise goods and the introduction of an additional excise tax on one of its components will be redundant.

Popular oil

Tkachev on Friday recalled that the Ministry of agriculture has prepared amendments to the Technical regulations of the Customs Union on dairy products and the Code on administrative offences, concerning the use by producers of palm oil. The Minister noted that the project has been coordinated with the ministries and agencies is coordinated at the level of the EAEU. “I hope that he will get support and from 1 January 2017 will come into force, — said Tkachev. — We will be in large letters write on the label that the product contains palm oil to the consumer to make their choice”. The Minister also said that the bill provides for a sharp increase in fines for “one or the other manufacturer will have fun and hide from the government, regulatory authorities and the public that uses “palm” and not inform”. “Severe penalties — more than 1 mln. I Think it will be quite effective”, — concluded the head of the Ministry of agriculture.

In the case of the introduction of new excises the most critical will be the excise tax on palm oil, says the consultant of consulting group “neo the Center” Andrey Zhikharev. “The scale of the use of palm oil is enormous: it is now almost impossible to find biscuits or waffles without palm oil — he says. — Curd snacks, cakes, candy, pies, cakes, dairy desserts and even chocolate — is not a complete list of products, which have almost no content without palm oil”. According to the representative of the holding “Solar products”, one of the largest in Russia manufacturers of margarine, the content of palm oil in margarine is 40-60%, and in the cost of bakery and confectionary industries the share of industrial Margarines and fats reaches 40%.

In 11 months of 2015 in Russia imported palm oil and its fractions in $to 580.7 million, which is 1.5% less than in the same period of the previous year, follows from the data of international trade Center of Moscow.

Popularity of palm oil can be explained by the relatively low price, Zhikharev says: one ton of palm oil is now worth about $600, and, for example, sunflower, — more than $900. “Palm oil in its structure is best suited for baking, and besides, it is the cheapest of what is available to Russian confectioners,” agrees Executive Director of the research center of the confectionary market (of ZIKR) Elizaveta Nikitin. According to her, the excise tax will inevitably affect the price of confectionery products — it will grow at least by 10-15%. Thus by the end of 2015 the growth of prices for confectionery goods in Russia amounted to an average of 24.5%, calculated before ZIKR citing data from Rosstat.

“The industry cannot indefinitely suppress the growth of prices for raw materials, increasing their own efficiency, is obvious. Excise first perelazit on the shoulders of the enterprises, and eventually to the end customer,” — said the representative of “Solar products”. The excise tax will increase the cost of margarine by at least 25%, he predicts. According to Rosstat, kilogram of margarine in 2015 rose 31.7% to 115,5 RUB With margarine consumption as a relatively inexpensive product increased in recent years, wrote earlier . “The demand for margarine is always increasing in the years of crisis” — confirms the representative of “Solar products”.

The President of the Union of producers of soft drinks Dmitry Petrov noted that in the case of the introduction of excise duty the inevitable rise in the price of carbonated beverages and, as a consequence, the decline in their sales. He could not name a possible price increase as the possible rate of excise duty have not voiced.

According to international research from Euromonitor International, sales of soda in Russia are already shrinking in real terms volume of Russian market in 2015 decreased by 9.9%, to 4.05 billion litres, although a year earlier, the market showed growth. In monetary terms the market volume in 2015 amounted to 178,6 billion rubles. the Main producers of soda in Russia, according to Euromonitor, is The Coca-Cola Company and PepsiCo occupy more than 60% of the market. Press-services of both companies on Friday declined to comment.

The chips market, which is also referred to as “candidates” for the imposition of excise taxes, drops in volumes last two years: 0.5% in 2014 and 5% in 2015, follows from the data of Euromonitor. The market is shrinking because of lower incomes, according to analysts Euromonitor. In addition, chips, and soda are not necessities, so consumers easily abandon them in a crisis, says the analyst of international research company “Nielsen Russia” Yuliya Chmyr.