The Government of Ukraine has drafted a bill for the Rada (parliament), according to which beer excise duty will be increased 58% to USD 0.1 per ltr in two stages. The first stage is planned for January 1, 2009–June 30, 2009, when excise duty will be lifted to USD 0.08 per ltr, followed by a further decrease to USD 0.1 per ltr in July 1, 2009.
Earlier in 2008, the government already exploit the opportunity to fill the gap in the budget by lifting the beer excise duty to USD 0.07, which did not receive approval from the Rada.
Our view: Ukraine has the lowest beer excise duties among its closest neighbors Russia, which are USD 0.12 and USD 0.28 respectively. In previous years, beer producers used to pass the increased in excise tax on to the end product. In our view, intense competition within the industry and the further rise of excise taxes could squeeze operating margins, forcing small companies to leave the beer market.