Pharmaceutical manufacturers oppose the introduction of an excise tax on ethanol
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Pharmaceutical manufacturers in the EAEU countries criticized the initiative of the Ministry of Finance to extend excise taxes on ethyl alcohol to ethanol, according to a letter from the specialized association. According to the companies, this will not help in the fight against illegal alcohol, but will provoke an increase in prices for a number of pharmaceutical substances and, ultimately, for drugs from the Vital and Essential Drugs list. According to Kommersant, the departments in charge of the pharmaceutical industry – the Ministry of Health and the Ministry of Industry and Trade – are not yet ready to support the position of the Ministry of Finance. The deadline for submitting their objections is today.
“The Ministry of Finance’s proposal to extend the excise tax on ethyl alcohol to ethanol will not lead to a whitewashing of the illegal alcohol market in the Russian Federation, but to an increase in the cost of pharmaceutical substances and, ultimately, drugs from the list of vital and essential drugs (VED)” – with such criticism of the proposal in an address to the head of the department The Association of Pharmaceutical Manufacturers of the Eurasian Economic Union (AFPEAEU; Kommersant has the letter) spoke to Anton Siluanov.
For the first time, the need to introduce an excise tax on ethanol (we are talking about medical alcohol) was announced in the summer by the head of the Federation Council Valentina Matvienko: according to her, in 2022, 6.8 million deciliters (dal) of medical alcohol were produced in the Russian Federation, and only 1 was in demand in the pharmaceutical industry .6 million decaliters, the rest of the volume was used for the production of illegal alcoholic beverages. The proposal was then supported by the head of the Ministry of Finance, Anton Siluanov, and in early August the department sent draft amendments to Chapter to the government apparatus. 22 (“Excise taxes”), part 2 of the Tax Code (TC). According to the department, the extension of excise taxes to ethanol will allow the continued legalization of the alcohol market in the Russian Federation – after tightening the requirements for the production and circulation of ethyl alcohol, the department records an “unjustified increase” in the production of excise-free ethanol. As of 2023, we recall that amendments to the Tax Code increased the excise tax rate on other alcohol-containing products from 589 rubles. up to 613 rub. for 1 liter of anhydrous alcohol. In 2024, the excise tax is planned to increase to 638 rubles, in 2025 – to 664 rubles.
As follows from the AFPEAEU letter, the excise tax will make the production of many pharmaceutical substances that are used to create drugs from the Vital and Essential Drugs list unprofitable. An increase in prices for them by 30–80% to compensate for the excise tax is hardly possible due to government regulation. “Ultimately, it will not even be Russian pharmaceutical production that will suffer, but patients who will be forced to switch to more expensive foreign analogues of necessary drugs,” notes the head of the AFPEAEU, Alexey Kedrin. Let us note that the production of domestic pharmaceutical substances is one of the main priorities of the industry development strategy “Pharma-2030” (see “Kommersant” dated October 11).
As Liliya Titova, executive director of the Union of Professional Pharmaceutical Organizations, notes, the Ministry of Finance’s proposal to compensate manufacturers for part of the costs they will incur when introducing an excise tax does not yet look realistic. “We have not seen specific proposals for this mechanism, and there is a feeling that they want to create it only in words, otherwise why introduce additional taxation?” – she notes, proposing to solve the problem of illegal alcohol trafficking differently, by taking into account its transfer from the manufacturer.
As Kommersant learned, the government apparatus is waiting for the position of a number of relevant departments, including those that oversee the pharmaceutical industry, the Ministry of Finance and the Ministry of Industry and Trade, on the controversial issue until October 31. According to Kommersant, at the end of last week the ministries had not returned to the government with either an agreed position or objections. Earlier, Deputy Head of the Ministry of Industry and Trade Ekaterina Priezzheva stated that the department stands in solidarity with pharmaceutical manufacturers in assessing the consequences of the introduction of excise taxes. It is likely that the intrigue will develop today, and it may be complicated by the fact that the document, to which no formal objections have been submitted, according to the new White House rules (see Kommersant of September 15) is now considered agreed upon and for a return to the search for a compromise on it The intervention of relevant deputy prime ministers may be required.
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