The reduction of excise duties on the stronger variety of alcoholic beverages was pitched by the government as a win-win situation across the board. The beverage producers would be able to push up dismal sales, the government could generate much-needed revenue, and the drop in selling prices would allow legal products to duel more adeptly with cheaper contraband alternatives. It even won the Parliament's approval without any complications.
But excise taxes on beer emerged from the government's ax unscathed, and beer producers are worried. Audrius Vidzys, vice-president of the Lithuanian Beer Producers' Association, said that the past year's substantial growth in the industry could sharply drop in the coming year.
"During last year, beer producers experienced a 15 percent to 20 percent increase in growth. If we have a 5 percent increase this year, I think we can consider ourselves lucky," said Vidzys.
The excise cuts on strong alcoholic beverages will be enacted when the news is printed in the state newspaper,Valstybes Zinios. Then excises taxes on vodka, for example, will drop from 54 Lithuanian centas ($0.13) per one percent of alcohol concentration in each liter to 30 centas. In other words, the price for a bottle of vodka, which currently costs 20 litas will be cut almost in half. Vidzys said beer producers would like to see a similar attitude toward beer production.
The excise duty for beer is 20 centas per liter for the first million liters of beer produced. But it is doubled for beer produced beyond the million liter amount. Perhaps even more sobering, according to Vidzys, is that the 20 centas deal is expected to evaporate by the end of the year, leaving the 120 or so licensed breweries in the country to shoulder an immediate 40 centas per liter burden.
"Each beer brewery loses about 200,000 litas a year in profits because of the excises," said Vidzys. "Perhaps the bigger beer companies won't feel the effects [from the excises] as much as smaller ones. Foreigners have bought large stakes in the bigger breweries so they can afford to spend money on marketing and advertising to increase sales. The smaller ones can't."
If the excise duties increase to 40 centas per liter, regardless of the amount produced, Vidzys says the smaller breweries will be forced to cover the amount with noticeable increases in selling price.