Journal of Tax Reform
Analysis of and Improvements of Excise Taxation on Beer in Russia
Elena V. Iadrennikova 1, Yulia V. Leontyeva 1, Igor A. Mayburov 1,2
1 Ural Federal University named after the first President of Russia B. N. Yeltsin, Yekaterinburg, Russian Federation
2 Far Eastern Federal University, Vladivostok, Russian Federation
Abstract
Excessive consumption of strong spirits in today’s Russia continues to generate a number of negative effects. This makes it highly relevant to change consumers’ preferences so that they choose low-alcohol drinks, wine and beer. Beer is the most promising drink in terms of its capacity to replace strong alcohol in the structure of consumption. Russia’s beer industry needs additional fiscal incentives. The purpose of this study is to analyze the taxation of beer in Russia and propose improvements to beer taxes. The authors proceed from a hypothesis that by improving the system of excise duties on alcoholic drinks in Russia by means of beer excise tax rates that vary based on alcohol content would make it possible to change the price structure of beer of various strengths. That would encourage consumers to shift their preferences in favor of lower-alcohol products. The research method includes the analysis of excise duty revenues in Russia as a percentage of total government revenue as well as the structure and dynamics of excise duty revenues in Russia by type of alcohol. Special attention has been paid to beverages with low alcohol content and beer. A comparative analysis has been conducted of beer tax rates in Russia and the EU. An unconventional market study has been done of beer sales points to get a picture of the beer sales structure by alcohol content.
Keywords
Excise duties; alcoholic drinks; beer; alcohol content of beer; excise tax rate; price of beer; consumer preferences
JEL classification
H20, H30Highlights
1. The introduction of beer excise tax rates that vary based on alcohol content in Russia will bring down the price of lower-alcohol products and increase the price of higher strength beers
2. Price differentiation depending on alcohol content will encourage consumers to shift their preferences in favor of lower-alcohol beers
3. The proposed mechanism of calculating beer tax is more fair and rational both for brewers and consumers. From the state’s perspective, the changes to beer taxes would result in lower tax revenue, but would help preserve public health and reduce healthcare expenditures thanks to a decrease in the consumption of beer with high alcohol content
References
1. Iadrennikova E. Prospects of introduction of excise tax on sugar sweetened beverages in Russia. In: Yurevna K. A., Borisovich A. I., DeJong W. M., Vladimirovich M. N. (eds) International Conference Responsible Research and Innovation. FUTURE ACAD, 2017. Pp. 295–301. DOI: 10.15405/epsbs.2017.07.02.38.
2. Clements K. W., Johnson L. W. The demand for beer, wine, and spirits: a system-wide analysis. Journal of Business, 1983, vol. 56, no. 3, pp. 273–304. Available at: https://www.jstor.org/stable/2352799.
3. Norstrom T. (ed.) Alcohol in postwar Europe: Consumption, drinking patterns, consequences and policy responses in 15th European countries. ECAS I. Stockholm: National Institute of Public Health, European Commission, 2001.
4. Popova S., Rehm J., Patra J., Zatonski W. Comparing alcohol consumption in central and eastern Europe to other European countries. Alcohol and Alcoholism, 2007, vol. 42, no. 5, pp. 465–473. DOI: 10.1093/alcalc/agl124.
5. Moskalewicz J. Lessons to be learnt from Poland‘s attempt at moderating its consumption of alcohol. Addiction, 1993, vol. 88, pp. 135–142.
6. Bielinska-Kwapisz A., Mielecka-Kubien Z. Alcohol Consumption and Its Adverse Effects in Poland in Years 1950–2005. Economics Research International, 2011, vol. 2011. DOI: 10.1155/2011/870714.
7. Young D. J., Bielińska-Kwapisz A. Alcohol taxes and beverage prices. National Tax Journal, 2002, vol. 55, no. 1, pp. 57–73. DOI: 10.17310/ntj.2002.1.04.
8. Final report to EC DG Taxation and Customs Union. London Economics, 2010. 282 p. Available at: https://ec.europa.eu/taxation_customs/sites/taxation/files/resources/documents/common/publications/studies/min_rates.pdf.
9. European Commission. Taxation and customs union. Reading allowed: Tax information Communication database, 2016. Available at: https://ec.europa.eu/taxation_customs/business/excise-duties-alcohol-tobacco-energy/excise-duties-alcohol/excise-duties-alcoholic-beverages_en.
10. Babor T. F., Caetano R., Casswell S., Edwards G., Giesbrecht N., Graham K., Grube J., Hill L., Holder H., Homel R. Alcohol: No ordinary commodity — a summary of the second edition. Addiction, 2010, vol. 105, no. 5, рр. 769–779. DOI: 10.1111/j.1360-0443.2010.02945.x.
11. Becker G., Murphy K. A theory of rational addiction. Journal of Political Economy, 1988, vol. 96, no. 4, рр. 675–700. DOI: 10.1086/261558.
12. Seim K., Waldfogel J. Public monopoly and economic efficiency: evidence from the Pennsylvania liquor control board’s entry decisions. American Economic Review, 2013, vol. 103, no. 2, рр. 831–862. DOI: 10.1257/aer.103.2.831.
13. Cook P. J., Moore M. J. The economics of alcohol abuse and alcohol-control policies. Health Affairs, 2002, vol. 21, no. 2, pp. 120–133. DOI: 10.1377/hlthaff.21.2.120.
14. Xu X., Chaloupka F. J. The effects of prices on alcohol use and its consequences. Alcohol Research & Health, 2011, vol. 34, no. 2, pp. 236–245. Available at: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3860576/
15. An R. P., Sturm R. Does the response to alcohol taxes differ across racial/ethnic groups? Some evidence from 1984–2009 behavioral risk factor surveillance system. Journal of Mental Health Policy and Economics, 2011, vol. 14, no. 1, pp. 13–23.
16. Razvodovsky Yu. Price elasticity of demand for alcohol and sales. Narcology, 2013, vol. 3, pp. 72–77.
17. Wagenaar A. C., Salois M. J., Komro K. A. Effects of beverage alcohol price and tax levels on drinking: a meta-analysis of 1003 estimates from 112 studies. Addiction, 2009, vol. 104, iss. 2, pp. 179–190. DOI: 10.1111/j.1360-0443.2008.02438.x.
18. Chaloupka F. J., Grossman M., Saffer H. The effects of price on alcohol consumption and alcoholrelated problems. Alcohol Research & Health, 2002, vol. 26, pp. 22–34.
19. Global Status Report on Alcohol 2004. World Health Organization Department of Mental Health and Substance Abuse. Geneva, World Health Organization, 2004. 88 p.
20. Status Report on Alcohol and Health in 35 European Countries. World Health Organization, 2013. 178 p.
21. Anderson P., Chrisholm D., Fuhr D. C. Effectiveness and cost-effectiveness of policies and programmes to reduce the harm caused by alcohol. Lancet, 2009, vol. 373, pp. 2234–2246. DOI: 10.1016/S0140-6736(09)60744-3.
22. Elder R. W., Lawrence B., Ferguson A., Naimi T. S., Brewer R. D., Chattopadhyay S. K., et al. Task Force on Community Preventive Services. The effectiveness of tax policy interventions for reducing excessive alcohol consumption and related harms. American Journal of Preventive Medicine, 2009, vol. 38, no. 2, pp. 217–229.
23. Waters T. M., Sloan F. A. Why do people drink? Test of the rational addiction model. Applied Economics, 1995, vol. 27, no. 8, pp. 727–736. DOI: 10.1080/00036849500000062.
24. Grossman M., Chaloupka F. J., Sirtalan I. An empirical analysis of alcohol addiction: results from the monitoring the future panels. Economic Inquiry, 1998, vol. 36, no. 1, pp. 39–48.
25. Levy D., Sheflin N. The Demand for Alcoholic Beverages: An Aggregate Time-Series Analysis. Journal of Public Policy & Marketing, 1985, vol. 4, pp. 47–54. Available at: https://www.jstor.org/stable/30000073.
26. Pogorletskiy A. Changes in Beer Excise Tax Levying: Consequences for Budget and Regional Development (Case of St. Petersburg). Ekonomicheskaya Politika = Economic Policy, 2016, vol. 11, no. 4, pp. 115–130. DOI: 10.18288/1994-5124-2016-4-05 (In Russ.)
27. Sokolov I. A. (ed.). A study of the excise burden on certain categories of alcoholic products (wine, beer, spirits) in various countries. Moscow: Izdatel’stvo instituta Gajdara, 2013. 188 p. (In Russ.)
28. Cook P. J. The effect of liquor taxes on drinking, cirrhosis, and auto accidents. In: Moore M. H., Gerstein D. R. (eds) Alcohol and Public Policy. Washington, DC, USA, National Aca-demy Press, 1981, pp. 255–285. Available at: https://www.nap.edu/read/114/chapter/14#267.
29. Cook P. J., Tauchen G. The effect of liquor taxes on heavy drinking. Bell Journal of Economics, 1982, vol. 13, no. 2, pp. 379–390. Available at: https://www.jstor.org/stable/3003461.
30. Troyanskaya M., Nizamieva, Yu. Improvement of excise taxation as an instrument of tax regulation. Rossiiskoe predprinimatelstvo = Russian Journal of Entrepreneurship, 2013, no. 14, pp. 157–163. (In Russ.)
31. Yurtayev I. Excise duties on beer. RISK: Resursy, Informatsiya, Snabzhenie, Konkurentsiya = RISK: Resources, Information, Supply, Competition, 2005, no. 2, pp. 76–78. (In Russ.)
About Authors
Elena V. Iadrennikova — PhD in Economics, Associate Professor, Department of Financial and Tax Management, Ural Federal University named the first President of Russia B. N. Yeltsin (19 Mira St., 620002, Yekaterinburg, Russian Federation); ORCID: 0000-0002-8530-3312; e-mail: elena.yadrennikova@mail.ru
Yulia V. Leontyeva — PhD in Economics, Associate Professor, Department of Financial and Tax Management, Ural Federal University named the first President of Russia B. N. Yeltsin (19 Mira St., 620002, Yekaterinburg, Russian Federation); ORCID: 0000-0003-4676-9926; e-mail: uv.leonteva@mail.ru
Igor A. Mayburov — Doctor of Economics, Professor, Head of the Department of Financial and Tax Management, Ural Federal University named the first President of Russia B. N. Yeltsin (19 Mira St., 620002, Yekaterinburg, Russian Federation); Far Eastern Federal University (8 Suhanova St., 690950, Vladivostok, Russian Federation); ORCID: 0000-0001-8791-665X; e-mail: mayburov.home@gmail.com
For citation
Iadrennikova E. V., Leontyeva Yu. V., Mayburov I. A. Analysis of and Improvements of Excise Taxation on Beer in Russia. Journal of Tax Reform, 2018, vol. 4, no. 2, pp. 142–156. DOI: 10.15826/jtr.2018.4.2.049
Article info
Received June 20, 2018; accepted July 24, 2018
DOI: http://dx.doi.org/10.15826/jtr.2018.4.2.049
Download full text article:
~321 KB, *.pdf
(Uploaded
26.09.2018)
Created / Updated: 31 August 2015 / 3 July 2017
© Federal State Autonomous Educational Institution of Higher Education «Ural Federal University named after the first President of Russia B.N.Yeltsin»
Remarks?
select the text and press:
Ctrl + Enter
Portal design: Artsofte
ISSN 2414-9497 (online)