The ministry of finance of the Russian Federation plans to hike excise tax rates by 30 per cent next year and methodically raise them by an annual 20 per cent further on, writes the Russian business daily Vedomosti.

The report on taxation policy drawn up by deputy minister Sergey Shatalov provides that the combined excise regime existing for the cigarette industry since 2003 is most likely to be preserved. However, given the tobacco companies practice what is seen by the government as artificial understatement of their products’ price so that to partially save their tax payments, the ministry of finance plans to levy excise tax on cigarettes on basis of their retail price, and not producer price as is done today. Maximum retail price is to be quoted on each cigarette pack. The report is to be submitted for the cabinet’s consideration early next month, with the new system planned to take effect as from 1 January 2007. (vt)