Alcohol taxes set to remain stable in 2019
The Verkhovna Rada has considered the issue of excise tax rates for alcoholic beverages. In 2019, changes are not planned . This is stated in the Draft Law No. 9260 “On Amendments to the Tax Code of Ukraine and Certain Other Legislative Acts of Ukraine on Improving the Administration and Revision of the Rates of Individual Taxes and Duties”, which was supported in the first reading. It concerned all alcoholic beverages – vodka, wine, beer, low alcohol drinks, etc.
In 2017, tax on alcoholic beverages was increased by 20%. However, this did not provide additional revenues to the state budget, as expected, but in fact led to a decrease. Thus, the volume of budget revenues from alcoholic drinks amounted to UAH 6,246 billion in 2017, compared to UAH 6.405 billion in 2016.
In the period from 2014 to 2017, excise tax has increased by 125% – from UAH 56.42 per 1 litre to UAH 126.96 per 1 litre of 100% alcohol. At the same time, revenues grew by only 14% – from UAH 5.491 billion to UAH 6.245 billion.
The EBA Committee on the Import and Trade of Alcoholic Beverages underlined that the illegal alcohol market continues to increase. And further tax increases would further accelerate this process. According to the State Statistics Service, more than 50% of strong alcohol (vodka, cognac, etc.) on the Ukrainian market is illegal. Today illegal businesses earn 100 times more from one bottle of vodka than official producers of Ukrainian alcohol. Thus legal businesses which pay taxes and support official employment experience serious losses.
The quality of illegal alcohol is a cause of great concern. Often, it even does not meet the minimum requirements of food safety. According to physicians, every year more than 10 thousand people are hospitalised because of low-quality alcohol. Therefore, state policy must focus on stopping the counterfeit alcohol trade and the transparent disposal of confiscated alcohol.
The business community thanks the Verkhovna Rada Committee on Taxation and Customs Policy. Manufacturers and importers of alcohol welcome this decision of the Verkhovna Rada and look forward to the final adoption of the document without amending tax for alcohol. This will allow transparent manufacturers to slow down production cuts and Ukraine can hopefully take one step towards resolving the severe problems created by illegal alcohol.