Russian must not hike alcohol excise duties sharply

The Russian government should not raise excise duties on alcohol sharply to compensate for a lower payroll tax as the measure is fraught with the population drinking more low-quality alcohol, Prime Minister Vladimir Putin has said on Thursday challenging some recent presidential suggestions.

On Wednesday, President Dmitry Medvedev suggested cutting the payroll tax which was raised to 34% from 26% this year to improve the investment climate in the country. Some experts said these measures could be partly compensated by higher excise duties, and Presidential Economic Aide Arcady Dvorkovich did not rule out this option when speaking about possible compensation measures.

“A sharp increase will not make people drink less, but will lead to consuming substitutes and increased moonshine production,” Putin told a government meeting.

“We can not relieve business of the tax burden and shift it to ordinary people … You know my attitude to drinking people, we should fight it, but there are no simple solutions … This is not primarily a question of raising excise taxes and prices for these products.”

He also said the country’s budget could lose from 400 to 800 billion rubles from cutting the payroll tax which was increased this January to finance pensions and modernization of the country.

Some recent discrepancies between Putin and Medvedev raised suspicions of a split in the power-sharing tandem and a start of struggle for presidency ahead of March 2012 elections.

MOSCOW, March 31 (RIA Novosti)

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