2024-04-03 00:34:07
In 2024, excise rates on tobacco products and alcoholic beverages will be increased in Azerbaijan. This is stated in the document “Declaration on the preliminary indicators of the state and general budgets of 2024” prepared by the Ministry of Finance.
According to the proposed change, the excise rate is increased from 38.5 manats to 45.5 manats per thousand units of cigarettes and tobacco substitutes. In addition to traditional cigarettes, next year the prices of electronic cigarettes, which have become popular in the country in recent years (excise rate from 25 kopecks to 2 manats per unit) and tobacco products consumed as a result of heating (steam) (from 14 manats to 16 manats per thousand units) are planned to be increased.
In addition to tobacco products, excise duties on alcoholic beverages will also be increased. The excise rate is increased from 4 manats to 4.8 manats per liter of vodka, dark drinks and dark drink materials, liquor products and cognac materials. All these increases will ultimately increase the cost of those products. This means that the prices of tobacco products and alcoholic beverages will increase. As a result, the government predicts to increase excise revenues by 145 million manats or 12 percent in 2024.
According to the statement of the State Statistics Committee (SSC), 1 billion 751 million manats were spent on the purchase of alcoholic beverages and tobacco products in Azerbaijan in the first 9 months of this year. Currently, the share of alcohol and tobacco in the retail trade turnover in the country is 4.3 percent. So, out of every 100 manats spent during retail trade in the country, 4 manats and 30 kopecks are spent on alcohol or cigarettes.
It is clear from the document published by the Ministry of Finance that not only the increase in excise duties will affect the price increase of alcoholic beverages and tobacco products in the country. It is noted in the document that taking into account the international experience, steps are being taken to determine the minimum price requirement for the retail sale of alcoholic beverages. That means, after this change, it will not be possible to sell alcohol at a price lower than the price specified by the government.
Some products will be exempt from VAT
In the document released by the Ministry of Finance, concessions in customs duties and VAT, as well as changes in the legislation were reflected. It is reported that there will be concessions for food products imported from abroad and used as part of the minimum consumption basket. In addition, concessions will be applied to the import of intermediate products, as well as a number of techniques and equipment, necessary for the domestic production of the field.
According to the decision of the Cabinet of Ministers, bread and bakery products, potatoes, vegetables and melon products, fruits and berries, meat and meat products, milk and milk products, eggs, sugar, vegetable and butter are food products included in the minimum consumption basket in Azerbaijan.
Will discounts affect prices?
In the last two years, especially in Azerbaijan, food prices have risen sharply. Last year, food inflation in the country exceeded 20 percent. This year, the same indicator is close to 15 percent. Despite such high inflation, the government’s failure to make significant concessions on value-added tax (VAT) and customs duties has so far been among the main criticisms leveled at the government by independent experts. In this regard, the introduction of concessions in the mentioned directions, albeit late, can have a certain effect on the level of prices.
It should not be forgotten that in recent years, Azerbaijan has received more customs revenue than forecast due to inflation. In the opinion of the Chamber of Accounts regarding the implementation of the state budget of the previous year, it is stated that 17 percent of the funds collected by the State Customs Committee in 2022 – approximately 961 million manats – was formed due to inflation. Due to higher prices, the fees received for those products were higher. In other words, last year, the State Customs Committee received 1 billion manat more revenue than expected due to inflation. Although 1 billion manat more customs payments were collected than forecast, the fact that the government did not make serious concessions to customs duties in the conditions of high price increases raises justified criticism.
However, it should also be taken into account that in the present case, only the reduction of customs duties may not have a serious effect on the price level. After all, such mechanisms implemented by governments are effective if there is a competitive environment in the market and the participants are forced to adapt to such steps of the government. But there are serious problems at the level of competitive environment in many fields in Azerbaijan. Therefore, reducing customs duties without improving the competitive environment in the country’s economy can only reduce the costs of that limited number of companies. It should be taken into account that the main purpose of taking such steps is not to enable companies to reduce their costs and take more income. With an effective customs policy, the government has the opportunity to influence the rising costs of consumers. For this reason, in terms of preventing the high inflation currently prevailing in Azerbaijan, the liberalization of economic activity in the country, the creation of equal opportunities for everyone entering the market, and similar factors are also very important.
Freedom radio