Domestic winemakers producing wines protected, will lose reduced rates of excise duty follows from “the Basic directions budgetary and a tax policy”. To equalize the excise tax on domestic and imported wine required by the rules of the WTO
Photo: Sergey Maligawa / TASS
The Ministry of Finance in the project “the Basic directions budgetary, tax and customs tariff policy” in 2019-2021 years was discussed today in the state Duma (*.pdf), proposed a number of significant changes in the order of excise taxation of wine products. The main one is the abolition of the 2019 a reduced rate of excise duty on wines and sparkling wines with a protected geographical indication (ZSU) and the protected designation of origin (SNMP). Because wines with a ZSU and SNMP can only be Russian wine is produced from Russian grapes, the Finance Ministry’s proposal means that excise taxes on domestic and imported wines will be adjusted.
Under WTO rules
Now the excise tax on still wines without ZSU and SNMP amount to 18 rubles. per liter, on sparkling wines without protection — 36 rubles. per liter, and protected wine and sparkling wine — 5 and 14 rubles. respectively. The Ministry of Finance and the Federal customs service in may last year confirmed that under Russian law, wines cannot be attributed to wines with ZSU/SNMP, which means that they are subject to normal excise tax, not reduced. After that, the importers of the wine began to assert that tax preferences for Russian winemakers are breaking the rules of the world trade organization (WTO). In October 2017, the Minister of economic development Maxim Oreshkin confirms that the European Union has a claim in the WTO to the Russian excise tax on imported wines.
Under WTO rules, it is impossible to create tax preferences for local products, so the preferential excise duty on wine with ZSU did not fit into the norms of the organization, said the head WineRetail Alexander stavtsev. The purpose of alignment of excise duties — “to create favorable conditions for the development of winemaking in Russia, which at the same time would meet the standards of international law taken by Russia to its international obligations,” confirmed RBC press service of the Ministry of Finance.
In the case of adoption of the proposal of the Ministry of Finance excise duties on domestic and imported wines will be the same: 18 RUB for still wines and for sparkling RUB 36. In 2020 under the current legislation they will grow up to RUB 1 to 19 and 37 rubles In the project “the Basic directions” the Finance Ministry said that the rates of all excise duties already installed in 2019 and 2020, will not change, and in 2021 will be indexed to the forecast inflation (4%). On this basis, the excise tax on still and sparkling wine in 2021 will be 20 and 38 rubles.respectively.
From its own grapes
The initiative of the Ministry of Finance will equalize the excise duties not only of Russian and imported wines and domestic wines with ZSU/SNMP and without. However, to save for domestic wine makers an incentive to create the production of protected wines, the Ministry of Finance intends to introduce the excise tax on grapes used for wine, champagne, cognac distillate, and those producers that use the grapes of its own production, to provide tax deduction “multiplying factor”.
The development of our own vineyards, founded in the Concept of development of viticulture and winemaking in the Russian Federation for the period up to 2025 — in particular, we are talking about “stimulating growth in the number of small wineries that are producing wines from its own grapes”. From the document of the Ministry of Finance follows that the wine producers who do not grow their own grapes and buy it from other Russian enterprises, will not be entitled to deduction.
While Russia produces very little wine from ZSU and SNMP, therefore, in excise revenues with them symbolic. In 2017, the consolidated budget collected only 88 million rubles in excise taxes on wine and champagne are protected; excise taxes on imported wine, champagne and wine drinks received 6.2 billion rubles (data of the Federal Treasury).
By the end of 2017 in Russia produced about 4-5 million bottles of wine from the ZGA, which corresponds to not more than 1.5% of total wine production, quoted the President of the Union of winegrowers and winemakers Leonid Popovich. However, according to him, production of these wines is constantly growing, so today, their share may reach about 2-3%.
The adjustment of Russian producers and importers of bad impact on the Russian wine market, says Popovich. However, the tax deduction for manufacturers that use their own grapes, gives hope that the negative effect will be smoothed, he adds. It is important that the law provided a deduction for the use of “own” and “made in Russia” grapes — not all winemakers are willing to grow the necessary number of grapes, but you can buy it from other Russian producers, says Popovich.
Russian wine producers have great difficulty in recent years tried to achieve the minimum favorable conditions, and the Finance Ministry’s proposal largely negates this job, says the President of the wine house “Abrau Durso” Pavel Titov. He “Abrau Durso” produces wine from its own grapes and the rest from imported wine materials, so the current exemptions do not apply to all production, Titov explained. In General, while the Ministry’s initiative is not entirely clear — for example, almost never the wine producer not only “its own grapes,” he says. And make the payment of excise duty for the grapes will be heavy even after deducting, in the end, this will again lead to the over-indebtedness of producers, concludes Titov.
The press service of the Ministry of Finance RBC said that a tax deduction will be granted to producers of wine products “full production cycle”, which uses as raw material “any grapes” (that is, including imports from other Russian legal entities). “Concrete proposals with the most optimal size of a tax deduction, multiplying factor etc. will be defined later. These issues are still being discussed”, — said the press service.
Also the Ministry of Finance proposed to levy excise duty on “wine drinks without added ethyl alcohol” in the same size as that on sparkling wines. Now such drinks, often masquerading as champagne, are subject to excise duty at the rate of 18 rubles. per liter, as conventional wine. The Ministry of Finance, therefore, proposes to increase the excise tax on them to RUB 36 Equating the rates of excise tax for wine masquerading as champagne, and excise taxes on champagne — a long-awaited and just measure, Popovich says, it aims at the removal of economic incentives for the manufacture of such beverages.
The excise tax on perfume
Another important measure of the excise regulation, proposed by the Ministry of Finance, is the inclusion in the list of excisable goods of any alcohol-containing perfumery and cosmetic products, irrespective of the volume of the container into which it is poured. This products is proposed to introduce zero rate of excise duty (currently zero excise duty only applies to perfumes and cosmetics in metal aerosol packing). In addition, the Finance Ministry proposes to give such producers eligible for a tax deduction equal to the amount of excise duty calculated upon the purchase of ethyl alcohol, if the manufacturer documents the use of alcohol in order to release cosmetic products.
The Finance Ministry earlier prepared a bill containing a similar proposal. The meaning of the initiative lies in the fact that measures of tax regulation to control the turnover of ethyl alcohol and to limit the circulation of alcohol products used as surrogate alcohol. The excise duty in the budget from sale of perfumery with zero rate of pay (i.e., fiscal logic is not here), but the manufacturer is obliged to submit an additional Declaration on excises, which shows how much alcohol products produced.
The participants in the perfume and cosmetic industry the bill of the Finance Ministry then criticized. They warned that a bona fide market participants will face additional burdens in the form of increasing the number of statements (even though they are so closely monitored by regulators), and manufacturers of alcohol-containing liquids “dual-use” is not affected. With surrogates it is better to deal by setting minimum retail prices for alcohol-containing perfume and cosmetic products on the level of retail prices for vodka, was said in the review of the business on the bill of the Ministry of Finance. In the end, the Ministry of economic development in the procedure of regulatory impact assessment did not support the bill and asked the Ministry of Finance to finalize it.