New Russian Taxes Hit Bulgarian Wine and Flowers

MOSCOW — In a move that has surprised many, the Russian government announced a significant increase in excise duties on imported alcohol, wine, and cut flowers from countries it deems “unfriendly,” including Bulgaria.

The new measure, outlined in a decree by the Ministry of Finance and reported by Moscow’s RBC publication, will take effect seven days after its announcement and will remain in place until December 31, 2024.

According to the decree, excise duties on strong alcoholic beverages will rise sharply 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 increase from 20% to 25% of the customs value, with a minimum charge of 2 euros per liter. The duty on cut flowers will see an even steeper rise, from 5% to 20%, with a minimum of 0.3 euros per kilogram.

The decision is presented by the government as a protective measure for the Russian market, where imported spirits account for approximately 12% and wine for nearly 40% of consumption.

Local producers and traders are seizing the opportunity provided by these protectionist measures.

In March, the Association of Vineyard and Winery Owners in Russia (AVVR) proposed an even more drastic increase in excise duties for products from “enemy countries” to 200% of the value, along with imposing quotas for Russian wines in cafes and restaurants.

The AVVR’s executive secretary claimed that in other wine-producing countries, local production constitutes 80-90% of the market, although this assertion was not substantiated by specific data.

The Ministry of Agriculture of Russia reports a significant increase in domestic flower production, which has grown 1.5 times over the past five years, with 393.5 million stems produced last year.

This sector is seen as having considerable potential for growth and increased domestic supply. In comparison, the Netherlands, a much smaller country, grows 1.7 billion cut flowers annually and holds about 60% of the global market.

Russian winemakers argue that markets in these “unfriendly” countries have been closed to them, despite their substantial investments in development, distribution, and advertising. They believe that Russia must reciprocate after these markets barred their products.

The Finance Ministry has justified the new excise duties as a response to higher tariffs on Russian goods imposed by other countries. They do not expect a significant impact on Russian consumers’ access to foreign spirits, citing the growing quality and variety of domestic products.

Analysts suggest that the revenue generated from these new excise taxes might be directed towards boosting tourism in Russia, as per President Vladimir Putin’s directives. Others believe the Kremlin’s motivations are tied to increasing budget revenues to support ongoing war expenditures.

As the new duties come into effect, it remains to be seen how this will impact the availability and prices of these imported goods in Russia, and how the affected countries will respond to this latest development in the ongoing economic conflict.