What will the introduction of excises on all ethyl alcohol lead to?

Speaker of the Federation Council Valentina Matviyenko proposes to impose an excise tax on all ethyl alcohol produced in Russia, including those used in medicine and perfumery. She announced this at a meeting of the council of the chamber with Prime Minister Mikhail Mishustin, his deputies and Finance Minister Anton Siluanov.

Matvienko noted that the Federation Council is “consistently” engaged in the fight against illegal alcohol, and thanks to the support of the government, it was possible to reduce its turnover. But it still remains quite high – about 27%, she said. The speaker suggested that measures be taken in three directions to “forget the topic of illegal alcohol and poisoning people.”

Now, along with ethyl alcohol for alcoholic products, which is subject to a high excise tax, there is an identical alcohol in circulation for the needs of the medical, perfumery and cosmetic industries, which is not subject to excise duty, Matviyenko said. As a result, the difference in the cost of these identical alcohols is more than 80%.

“Last year, with the needs of medicine in 1.6 million decalitres (dal) of medical alcohol, 6.8 million decalitres were produced, that is, four times more than the real need. Where does he go? Of these surpluses of medical alcohol in the volume of 5.2 million decalitres, 13 million decalitres of illegal vodka and other alcohol-containing products were produced, ”she was indignant.

In order to solve the problem “dramatically”, the speaker proposed to impose an excise tax on all ethyl alcohol produced in the country, “so that there is no such difference and cheap ethyl alcohol for illegal vodka.” She added that the state should subsidize the payment of excise tax on alcohol purchased by medical institutions.

According to Matvienko, this and her other proposals have been “worked out” with Siluanov, and he supports them.

Matvienko also called for the extrajudicial destruction of illegal alcohol seized in criminal cases. It is necessary to take a legislative decision, she stressed.

“The main objection that we put up <…>, in that the seized products are material evidence that a court decision is needed. But none of the violators has ever gone to court in three years, because they are criminals. In our country, criminal cases cannot be closed, material evidence is not destroyed. Well, let’s give a deadline: if they haven’t applied within three months… There are a lot of decisions,” said the speaker of the Federation Council.

Since 2015, law enforcement agencies have seized about 160 million liters of surrogate alcohol and alcohol-containing liquids and counterfeit alcohol, about a third of this volume has been stored in the warehouses of Rosspirtprom and the Ministry of Internal Affairs for more than three years, Matvienko noted. At the same time, the cost of storage per year for the federal budget is 1 billion rubles.

According to her, the risk of stealing surrogates from warehouses remains, which can also cause mass poisoning and death. Matvienko cited the “last poisoning” in the Volga region as an example: “Methanol was stolen from a warehouse, sold as alcohol, and so on.” (We are talking about mass poisoning with surrogate alcohol in several regions of Russia in early June, as a result of which 30 people died, over 100 were hospitalized. The reason was the alcohol of the Mister Cider brand – Vedomosti).

Matvienko cited data from the Ministry of Health, according to which more than a thousand people a year suffer from methanol poisoning, which is produced for the needs of the chemical industry and is a potent poison. The reason for mass poisoning is that it does not differ from ethyl alcohol in its organoleptic properties, she believes.

“To exclude further deaths and poisoning, methanol denaturation is necessary, that is, its change in taste, color or smell,” Matvienko said. According to her, this possibility is “confirmed” by chemical scientists, but “a powerful lobby” counteracts this, “finds a thousand non-existent reasons.”

The speaker also called for the transfer of control over the production and circulation of methanol from the Ministry of Health to the Ministry of Industry and Trade.

Mishustin, in response, noted that the tragedy mentioned by the speaker was not related to the moratorium on business inspections. “There was a crime, theft, which led to the death of people. The culprits have been found and will be held accountable before the law,” he said.

The Prime Minister also recalled that the President signed a law toughening responsibility for the illegal circulation of methanol under the guise of alcoholic beverages. “And he, by the way, was supported by the Federation Council,” Mishustin said.

In general, work to prevent a threat to the safety of people should be continued, he added. According to the prime minister, instructions “related to proposals to the Ministry of Finance on excise taxes” will be given, and the government will consider what “can still be done.”

To date, medical alcohol is not subject to excise duty, and unscrupulous manufacturers of cheap alcoholic products use this, says Sergey Shulyak, CEO of DSM Group. However, the proposed initiative is unlikely to help solve this problem, in addition, this measure will lead to an increase in the cost of medical alcohol, therefore, the production of pharmaceutical substances and drugs will rise in price, and the prices of drugs will also increase.

In this case, it would be more correct not to introduce an excise tax (for companies that produce alcohol, this will in any case become additional costs), but to strengthen control over the circulation of medical alcohol, Shulyak told Vedomosti.

RNC Pharma Development Director Nikolai Bespalov also believes that the initiative will lead to an increase in the cost of medical alcohol, and therefore, all medical products that are made from it.

According to Vadim Drobiz, director of the Center for Research on Federal and Regional Alcohol Markets (CIFRRA), the proposed measure is “useless” and will not help solve the problem of the existence of surrogate products.

The demand for cheap alcohol from part of the population will continue due to low incomes, and manufacturers will use other raw materials instead of medical alcohol, probably even worse, the expert explained.

In January, the State Duma was introduced a bill restricting the wholesale sale of medical alcohol. They, in particular, introduce a list of persons to whom drug wholesalers have the right to sell ethanol.

According to the head of the State Duma Committee on Economic Policy Maxim Topilin, one of the authors of the bill, some alcohol-containing medicines become the basis “for the production of illegal alcohol and loss of excises.” As a result, according to the Ministry of Finance, this leads to the fact that the budget does not receive the necessary 20-30 billion rubles.

In April, Deputy Minister of Health Sergei Glagolev declaredthat the department supports a bill to tighten the sale of medical alcohol, and this measure is timely.