Scenario analysis of changes in excise taxation of alcoholic beverages in Russia (Union of Russian Brewers, February 2022 - March 2023)

The research focuses on identification of approaches to establishing a socially and economically justified level of excise rates for beer, vodka and wine for the period up to 2025.

Main content of research:

1.     The impact of the pandemic on alcoholic products production: preliminary estimates.

2.    Forecast of the main parameters of socio-economic development of Russia for the period up to 2025.

3.      Scenario modeling of changes in excise rates for the types of alcoholic beverages under consideration up to 2025 on the industry production volumes (with identification of the share of large businesses and SMEs):

•     Baseline scenario - retaining the current excise regime (taxation according to the rates defined in the Tax Code of the Russian Federation up to and including 2024 and with an increase in the rates by the forecasted inflation for 2025).
•        Stress scenario - indexation of excise rates taking into account “real” inflation. This scenario assumes indexation of excise rates on alcoholic beverages for 2023 considering the accumulated (“unaccounted”) inflation in 2021-2022 and for 2024-2025 according to the projected inflation.
•      The optimal scenario is to freeze excise rates for all types of alcoholic beverages for 2023 at the 2022 level with subsequent indexation according to the projected inflation.

4.     Assessment of the consequences of the implementation of the considered scenarios of excise taxation modification for the alcohol industry and its related suppliers and sellers (distribution network) by projecting indicators of output changes (production volume), employment (average number of employees), taxes paid (with VAT and excise taxes).

The project was completed by March 1, 2023.