The beer market has reacted immediately, declaring that such unjustified increase is fraught with shutdown of plants, job losses, unemployment and, consequently, reduction of budget revenues. The parliament has found itself between hammer and anvil. On one hand the MPs want to save young generation from beer alcoholism, but on the other hand, jobs in post crisis period cannot be too many.
Three draft bills on increase of excise duty for beer were registered in the parliament on April 19 by both opposition and majority MPs. According to the initiators of the antialcohol campaign, simultaneous adoption of these bills will solve several problems at once. "First of all, increase of excise duty for beer from 0.87 to 2.50 hryvnias per liter will cause value appreciation of every beer bottle by 1-2 hryvnias and will become the next step towards termination of the policy of cheap alcohol, which cuts up health of Ukrainians. Secondly, the budget will earn additional four billion hryvnias, which will be spent for healthcare. And thirdly, a considerable part of earned means will be allocated for completion of "Ohmatdet" hospital complex, where children with cancer will undergo complex bone marrow transplantations," manager of "Our children" campaign and member of the board of trustees of "Ohmatdet" Anna Hopko says.
"President's program on economic reforms provides for offering a strong inducement for healthy lifestyle of the population. In particular, means earned from increased excide duties for alcohol and tobacco goods will be sent to a special fund of the state budget for financing healthcare activities," she notes.
However, the first question to ask activists is why beer, and not other alcohol drinks. Representatives of the coalition respond that Ukrainian teens (11-15 years old) hold the second place (after Czech Republic) on the level of beer consumption comparing to teens from 40 countries of Europe and CIS. In 2006 Ukrainian teens held the first place, but thanks to the increase of excise duty for beer by 2.5 times in 2009-2010, the consumption of beer among the teens reduced, though remains high anyway.
"In Ukraine beer is cheaper than juice or kefir and is available for all, as it has not been recognized legally as an alcoholic drink. in 1997-2007 the production of beer in Ukraine increased fivefold. In 2012 there were produced three billion liters of beer and only 2.7 billion liters of mineral water and non-alcoholic beverages. Current excise duty for beer in Ukraine is 4.5 times less than in Russia and makes less than 9% of the price. Thus, increase of the excise duty threefold will rise the price by 23% only," activists state.
At the same time, authors of the draft bills admit that excise duties for other alcoholic drinks must be increased as well, because the rate of death caused by abuse of alcohol started growing again. According to them, significant increase of excise duties for alcohol in 2009-2010 proved its effectiveness on health protection and reduction of death rate.
Ukrainian brewers, however, do not share the optimism of public organizations. Executive director of "Ukrpivo" organization Ihor Tovkach believes that triple increase of excise duty for beer will result into fall of the industry. "If the status of beer changes and the drink becomes alcoholic, producers and sellers will have to deal with a bunch of problems, like additional licenses and excise labels. It seems not a big deal, but this technological process will reduce production capacity by up to 50%," he says.
In his opinion, adoption of these draft bill will affect consumers, worker and the state. "First all, consumers will have to pay about three hryvnias more for a bottle, which will cause decline in demand. Decline in demand, in turn, will cause staff redundancy at breweries, agricultural enterprises, production sector, transportation and realization of beer. With 25% decrease of sales, about 10 thousand workers will be fired already this year. Supposing that enterprise will work under such conditions till the year end, additional budget revenues will make only 800 million hryvnias. Moreover, it is impossible to make economic forecast for 2014, as it is unknown which players will remain on the market. Thus, Carlsberg and AB InBev have announced possible shutdown of several production lines, as it happened in Russia, and Obolon considers relocation of production somewhere abroad. And finally, the collapse of the industry will not help the antialcohol campaign, as Ukraine tops the ratings of alcohol consumption by population not because of beer, but because of high per capita consumption of hard liquors," Tovkach says.
In general, Ukrainian business stands against the initiative and asks parliamentarians not to make abrupt moves. Brewers say that do support healthy lifestyle and remind about social campaign in support of sober driving, being organized by them.
Meantime, the opinions at the highest levels of power vary. Head of the parliamentary committee on healthcare Tetyana Bakhteyeva strongly recommends to adopt all three draft bills, while head of the budget committee Evhen Geller calls upon MPs to study the documents once again and think twice regarding the adoption. "This package of bills contradicts the budget legislation of Ukraine. Money from taxes and duties go to the common budget and then get distributed by the government for essential needs," he said. According to him, it is impossible to spend the money earned from increased excise duty directly on completion of "Ohmatdet".
Head of the parliamentary committee on taxation and customs policy Vitaly Holutynnik is also dead against the adoption of the package. "We cannot increase excise duty by 300% at once... Investors put two billion into breweries of Ukraine, and such drastic increase will cause capacity decrease by 26%. Lviv brewery, for example, will face shutdown. Taking economic decisions we should not follow the opinions and emotions of public organizations. Moreover, who says that only beer industry is responsible for healthcare in Ukraine? Now we are working on propositions to gradually increase excise duty for all kinds of alcoholic drinks by 15-30%."
In turn, first vice PM Serhiy Arbuzov expressed the opinion of the government on this delicate issue. "We have other means to use for completion of "Ohmatdet" complex. As for the increase of excise duty for alcohol, we support this initiative." At the same time he confirmed the words of Geller on that it is impossible to use earned means directly on construction of "Ohmatdet".
Speaker Volodymyr Rybak, in turn, offers to draw line between the construction of the hospital and the problem of beer alcoholism. "Public organizations blame me and the parliament for not submitting these draft bills for consideration. Having consulted the heads of committees and factions we decided to demark these two issues. "Ohmatdet" construction will be considered separately from excide duties. Moreover, we agreed to increase excise duties for all kinds of alcoholic drinks - beer, wine, vodka, etc. I am ready to summit these issues for consideration, but parliamentary committees still do have agreed position on them."
The last battle of public organization for their initiative will take place in autumn, when the parliament returns from vacations. By that time the committees must present their propositions on settlement of both issues. The final decision will be made by the parliament and the President, who may sign the law or veto it.
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