New government initiative threatens to explode prices for sweet soda

Why sugar was equated with nicotine and alcohol

The authorities are coming up with new ways to patch the gaping hole in the budget. The excise tax, which they want to introduce on lemonades and other non-alcoholic drinks containing sugar, will help to quickly cope with the problem. The state will receive multibillion-dollar profits from the innovation. As for sweet lovers, they will have to go broke to please their taste buds. The tax will inevitably lead to an increase in the price of the goods, and since the dependence on sugar is in no way inferior to the addiction to tobacco or alcohol, consumers will still spend money on such drinks.

The government returned to discussing excise taxes on sweet drinks. The Ministry of Agriculture and the Ministry of Finance reported that the departments were instructed to consider this issue. The annual collection offhand may amount to 10–20 billion rubles. True, the Ministry of Agriculture is still extremely skeptical about the introduction of the new tax. The ministry fears a possible rise in prices, a decrease in beverage production, as well as a decrease in the number of producers, and the emergence of an illegal market for sweet soda. It is known that two variants of the excise tax rate are being considered – depending on the cost of the drink or the sugar content in it.

Note that in Russia the consumption of sugar-sweetened beverages in comparison with comparable countries in terms of economic development is at a very low level, about 5-10 times less. At the same time, in terms of sugar consumption, Russians are not inferior to even the most economically developed countries: in Russia, they consume 41 kg per person, and in the EU or the USA – 38 and 33 kg/person, respectively.

Note that until now excise taxes have been introduced only on “luxury” or “bad habits.” Why is sugar on a par with nicotine and alcohol? The introduction of excise taxes on sweet drinks is part of a program proposed several years ago by the Ministry of Health and the Ministry of Finance. The initiative provided for an increase in excise taxes on food products with a high content of not only sugar but also salt. Then a wide range of products familiar to everyone would fall under the influence of the new measure – from dumplings and ketchups to soda and herring. But the increase in excise taxes was never adopted since the effectiveness of this measure was not fully justified.

The topic of excise taxes on sugar-sweetened beverages usually comes up during periods of sharp declines in oil export revenues. This was the case in 2016, but there was a fairly rapid rebound in income and this need was gone, says Alexander Rozman, senior analyst at Forex Optimum. “Now, despite the return of oil prices to the levels of November 2018, export revenues remain at a very low level due to the action of the restrictive OPEC + deal. Therefore, the topic of new excise taxes in 2021 is even more relevant than in 2016, and this time, with a high probability, it will receive practical implementation, ”he said.

Excise taxes are an excellent tool for directly collecting money and replenishing the treasury. We can say that sugar-sweetened drinks have been equated with alcohol. The state will receive real income, emphasizes Anna Vovk, chair of the MCCI committee on the development of the investment environment for business.

“It is necessary to understand the appetites of the state – 1 ruble from a bank or all 20 in order to predict a possible rise in prices. The details are still under discussion, but any excise tax is a tax that will increase the cost of the final product, ”she says.

According to the expert, there is no dose of sugar that can benefit the body. 1 glass of soda will contain 4 to 20 sugar cubes. This is a direct blow to health. There is 1 cube in a kilogram of bread, and half a cube in a can of tomato paste. “Sugar addiction can be compared with tobacco smoking, with alcohol addiction. And since sugar is akin to drugs, people cannot quickly quit using it. Such drinks will still be bought, ”Vovk believes.

There are also purely technical problems for the implementation of this innovation, notes the head of the analytical department of Amarkets Artem Deev. According to him, there is no technical regulation that would determine what applies to drinks with high sugar content, and it is unclear how to build a control system. In addition, the Ministry of Finance believes that the initiative will complicate reporting for manufacturers. “Excise taxes on carbonated drinks have not been introduced for many years for the reason that the effect of the innovation will not be the same as the government expects. It is likely that this measure will be postponed again, other proposals will appear, since the increase in excise taxes will clearly have a negative effect on the market, and will not affect the health of the country’s population, ”the source of Media is convinced.

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Stories under this byline are written/directed/published by the staff and editorial board of MegaloPreneur magazine. Some of the MegaloPreneur journalists may also be involved in investigating and finding facts.

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