OREANDA-NEWS. June 23, 2010. Belarus plans to increase excise taxes on alcoholic beverages 10% on average, a source in the administration of the country told.

“A presidential ordinance has been drafted to raise the excise rates 10% on average. According to preliminary reports, the new rates may be launched as early as July 1, 2010,” he said.

Excise taxes and the value-added tax make up 75% of vodka prices, 40% of fruit wine prices and 20%-25% of improved quality wine prices, and 26%-28% of grape wine prices.

If excise taxes are raised 10%, the share of taxes in vodka prices will rise to 78%-82%, and in the price of ordinary fruit wine will increase to 45%-48%.

According to representatives with Belarusian wineries, the profitability of output is around 6% now, and return on sales stands at 1.6%. If excise taxes are raised 10%, return on sales will go down by at least 3 percentage points.

“We will be working at a loss,” a representative in a wine-making company told Prime-Tass.

There are no plans to increase alcohol prices because of substantial overstocks and low spending power of households.

Retail vodka prices may be increased, however, any increase would affect sales.

“If vodka prices are increased, while wine prices remain unchanged, wine sales will rise, which will result in additional vodka inventories,” a representative at one of Belarusian refineries told Prime-Tass.

Experts believe the possible rise in excise taxes this year will devaluate the Special Part of the Tax Code, which sets excise taxes once a year.

As was reported earlier, Belarus also considers adjusting alcohol and cigarette excise tax rates.

A draft presidential ordinance has been prepared to set new excise tax rates on alcohol and cigarettes depending on their price segment [there are three segments – low, with prices per pack standing below 1,400 Belarusian rubles (Br), medium, with prices ranging from 1,400 rubles to 2,500 rubles per pack, and high, with prices per pack exceeding 2,500 rubles] and cigarettes that are not priced.

The most recent version of the document suggests reducing the excise tax rate on the low-priced cigarettes 8.3% to 6,100 rubles per 1,000 units, and raising the excise tax rate 22.48% on medium-priced cigarettes to 15,310 rubles, and 22.49% on high-priced cigarettes to 25,270 rubles.