The Russian government has unexpectedly decided to increase the excise duty on imported alcohol, wine, and cut flowers from "unfriendly countries," including Bulgaria. This new measure, which will take effect seven days after its announcement and remain in place until December 31, 2024, is outlined in a decree recently prepared and approved by the Ministry of Finance, according to Moscow's RBC publication.

The decree includes a significant rise in the excise duties: for strong alcoholic beverages, the rate will increase from 9% to 20% of the customs value, with a minimum charge of 3 euros per liter of 100% spirit, up from the current 1.4-1.5 euros. For wine, the duty will rise from 20% to 25% of the customs value, but not less than 2 euros per liter. Additionally, the duty on cut flowers will be raised from 5% to 20%, with a minimum of 0.3 euros per kilogram.

This decision is presented as a protective measure for the Russian market, where imported spirits account for around 12% and wine for nearly 40% of consumption. In August 2023, Russia had already increased the excise duty on "unfriendly" wines from 12.5% to 20%, and this new adjustment adds another 5 percentage points to the rate.

Local producers and traders are capitalizing on this protectionist trend. In March, the Association of Vineyard and Winery Owners in Russia (AVVR) proposed a drastic increase in excise duties for "enemy countries" to 200% of the value and suggested imposing a quota for Russian wines in cafes and restaurants. The AVVR's executive secretary noted that in other wine-producing countries, local production makes up 80-90% of the market, although the source of this data was not specified.

The Ministry of Agriculture of Russia reports that domestic flower production has increased 1.5 times over the past five years, with 393.5 million stems grown last year. The sector is seen as having significant potential for growth and increased domestic supply. In contrast, the Netherlands, which is less than half the size of Bulgaria, grows 1.7 billion cut flowers annually, capturing about 60% of the global market.

Russian winemakers argue that "unfriendly" markets have been closed to them, despite years of investment in development, distribution, and advertising. They believe that Russia must respond in kind after these markets barred their products.

The Finance Ministry has stated that the new excise duties are a response to higher tariffs on Russian goods imposed by other countries. However, they do not anticipate a major impact on Russian consumers' access to foreign spirits, citing the growing quality and variety of domestic products.

Analysts suggest that the revenue from these new excise taxes might be used to boost tourism in Russia, as directed by President Vladimir Putin. Others believe the Kremlin's motivations are tied to increasing budget revenues to support ongoing war expenditures.

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