Excise on ‘bad’ groceries will not save the budget

9 february 2016 | RBC-TV

“Imposing excise on groceries and drinks that are bad for people’s health will not affect the budget in any significant way,” said Elena Razumova, an expert of the Analytical Center. “Seeing how in 2015 about a million tons of palm oil was imported into Russia, if we were to levy a 30 % excise on its market price, that would have translated to a little more than USD 200 per ton and would have generated about RUB 20 billion as extra revenue. But that is a drop in the ocean if we remember that our budget deficit is almost RUB 2.5 trillion,” Ms. Razumova explained on RBC-TV.

Elena Razumova
Elena Razumova
Department for Expert Analytics

The expert believes the risks are too high while the potential extra revenue is rather modest. Manufacturers will be slammed with additional costs and pass those on to consumers through higher prices, she noted.

Estimating the potential extra revenue that could be generated by levying an excise on sodas or chips is difficult because there is no data on soda and chips production, Ms. Razumova noted. “However, if one of our strategic goals in potato production is import substitution than levying an excise on potato chips would run counter to that goal as potato chips are a major sector that uses potatoes as raw materials,” she explained.

The expert confirmed that the traditional excises on motor oil, motor vehicles, tobacco and alcohol have already reached their limits and there is little room for raising them even more as those markets are very much limited by the Russians’ purchasing power. Ms. Razumova believes some extra revenues can be squeezed by implementing harsher measures against illegal alcohol, especially illegal trade of strong alcohol. However, she does not think that would have a major effect on budget revenue.

Source: RBC-TV