November 22, 2012

Russia to apply additional tax on meat producers

Russia may impose an additional tax on meat producers to deal with high-fat products, as well as the use of antibiotics in meat production.

The tax forms part of a proposal by Russia's National Union of Consumers' Rights Protection.

Firstly, an additional tax rate of about 10-20% is proposed for meat and dairy products with a high cholesterol content. According to Customs Union experts, this measure will not only be beneficial for consumers, but will also bring more money to the federal budget. Following the introduction of the new tax, it is estimated the Russian treasury will receive an additional US$3.3billion every year. 

Pavel Shapkin, president of the National Union of Consumers' Rights Protection, said: "An increase in the tax rate on harmful food, consumption of which leads to the generation of excessive levels of cholesterol in the body, as well as obesity and metabolic disorders, is an initiative from the World Health Organisation (WHO). For Russia, the biggest problem is the use of antibiotics in food."

However, experts advise that, despite the benefits, the measure should be introduced gradually. Head of business assessment at analytical agency FinExpertiza, Alexander Dorofeev, said: "Meat without antibiotics in Russia, sold in specialised health food stores, currently sells at the two to three times the price of meat in standard stores. If we introduce this tax now, it is not known how many affordable and healthy meat products we will still have on grocery shelves. There is a lot of food containing harmful additives on Russian shelves, but consumers would not be able to understand this divergence [between healthy and potentially dangerous products],"

At the same time, Russian authorities have reacted favourably to the proposed initiative, but officials said it should be seriously modified before implementation.

"If we adopt such a law immediately, the price of meat on the Russian market will jump to unpredictable levels, and many manufacturers will go bankrupt. Producers need some time to adapt their businesses and facilities to the introduction of the new rules - at least six months. This way, we can avoid negative consequences for the industry. Overall, however, the initiative is simply necessary; in Russia, food containing antibiotics, pesticides, GMO and harmful additives is a major problem. Consumers are generally not interested in the healthiness of products, paying more attention to the price, while producers often do not show a full list of the harmful substances contained in these products on the labels," a source in Federal Service on Surveillance for Consumer rights protection and human well-being said.

In addition to meat and dairy products, it also proposed to introduce the same taxes on all fast-food products, such as chips, fries, burgers.