Excise taxes on wine may increase significantly in 2024

Amendments to the Tax Code introduced by the government to the State Duma on September 29 propose to significantly increase excise taxes on wine. In 2024, rates may triple, to 108–141 rubles. per 1 liter, which could lead to a 25% increase in prices for inexpensive imported items and a switch of consumers to beer and low-alcohol cocktails. Russian winemakers are counting on an improvement in the market balance.

The Government of the Russian Federation proposed to increase excise tax rates on wines, with the exception of fortified wines, by more than three times from the current 34 rubles from May 1, 2024. up to 108 rub. for 1 liter, follows from the draft amendments to the Tax Code submitted to the State Duma. For 2025, the rate is proposed to be set at 112 rubles. for 1 liter, for 2026 – 116 rubles. for 1 l. The excise tax on sparkling wines may also increase threefold, to 141–153 rubles. in 2024–2026. Comparable indexation should also affect wine drinks made without the addition of alcohol.

Indexation of excise taxes on wine is the most noticeable of the proposed measures to increase taxes on the alcohol market. For alcohol with a strength of over 9%, the excise tax rate during 2024–2026 may be raised from the current 613 rubles. up to 643–696 rub. for 1 liter, for drinks with a strength of less than 9% (except for beer, cider, wine) – from 490 rubles. up to 514–556 rub. for 1 l. Excise taxes on tobacco products may increase by 3%.

As a result, the budget may receive an additional 150 billion rubles. in 2024–2026, as stated in the justification for the project.

The head of the WineRetail information center, Alexander Stavtsev, says that triple indexation of excise taxes will actually put an end to the wide range of inexpensive wines in convenience stores. The initiative seems to play into the hands of distributors with a large share of premium wine in their assortment, who believed that wine cannot be cheap, the expert notes.

According to WineRetail, the measure will primarily affect imported wines. Prices for popular items, which after indexation of import duties increased from approximately 500 to 700 rubles. per bottle, can increase by about 25%, up to 1 thousand rubles. per bottle, calculated at WineRetail. The executive director of the wine trading company Fort, Alexander Lipilin, notes that after the increase in import duties, there are no imported wines on the market cheaper than 500 rubles. per bottle, and if they increase excise tax rates, there will be no positions left cheaper than 600–650 rubles. per bottle. But for conventionally expensive champagne, the measure will change almost nothing, he points out. Ladoga agrees that an increase in excise taxes can significantly regulate demand: some consumers of inexpensive wines will switch to beer, spirits and cocktails.

The increase in excise tax rates will also affect Russian winemakers, according to WineRetail. As Alexander Stavtsev notes, when producing wine from Russian grapes, more than 30 rubles can be returned from the excise tax paid today. for 1 l. But these funds should go to investments, for example, to planting vineyards or modernizing production, and winemakers will not be able to offset the increase in selling prices due to the “refundable excise tax,” he points out. CIFRRA director Vadim Drobiz predicts that the volume of the wine market in the Russian Federation may decrease by about 10% due to the erosion of the most budget items.

An increase in excise tax could improve the balance of the market, where there has been a sharp increase in imports from countries that are not subject to duties and act as transit for supplies of third-party wine, argues Fanagoria CEO Pyotr Romanishin. According to him, this leads to a sharp decrease in demand for Russian wine, which is why winemakers cannot process grapes from the new harvest, since the containers are full from last year. As Mr. Romanishin notes, winemakers are counting on a proportional increase in the “reverse excise” rate. Alexander Lipilin points out that the increased duty already protects Russian winemakers from inexpensive imports from almost all traditional wine-producing countries.

According to Rosalkogoltabakcontrol, in January-August 19.47 million decaliters of still wines were produced in Russia, which is approximately 5.7% less year-on-year; production of sparkling wines decreased by 10.5%, to 6.66 million decaliters. Retail sales of still wines during this period grew by 5.5%, to 37.3 million decaliters, sparkling wines – by 9.2%, to 12.1 million decaliters.

Anatoly Kostyrev