The minimum prices of alcohol are going to be increased as part of the fight against illegal alcohol circulation

6/19/15

At its meeting on June 17th, the Government of Ukraine adopted a new regulation that was developed by the Ministry of Finance of Ukraine to effectively combat illegal alcohol circulation, as there was an increase in the number of appeals arriving from economic entities.

The goal of the Ministry of Finance is to expand the tax base by reducing shadow economy and to fight against tax evasion, particularly in the alcohol industry.

Today, Ukraine’s alcohol market operates with minimum prices for alcohol production, which were approved in June of 2014. The purpose of introducing minimum prices was to fight against "illegal" production and circulation of alcoholic beverages. With this introduction, there will be a reduced possibility of illegally selling manufactured products at prices lower than the ones of the licensed products (products that have been approved and are ofproper quality), and thereby encourage people to stop buying low-quality goods.

However, due to the devaluation of the currency, rising prices for energy, raw materials and other components of the cost of alcoholic beverages that have occurred in Ukraine over the last year, the minimum price for alcohol products approved in the summer of 2014 was lower than its cost of production. Thus, the level of minimum prices ceased to perform its role of a "protector" against the sale of counterfeit production.

That is why, the Ministry of Finance has proposed to the Government to bring the minimum price back in line with market realities. Regulation "On Amendments to the Cabinet of Ministers of Ukraine of 30 October 2008 р. № 957" will help to achieve this change. According to the regulation, the minimum retail prices for alcoholic beverages will be raised: vodka – by 25%; cognac – by an average of 31%; wine – by 35%. At the same time, the Ministry notes that this increase will not have a significant impact on the rate of consumer inflation in Ukraine because the cost of purchasing alcoholic beverages, according to the State Statistics Committee, constitute only about 2.4% of the consumer basket of an average Ukrainian.

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