Publication: Monitor Volume: 3 Issue: 1

Back at work in the Kremlin, President Boris Yeltsin vowed in a nationwide radio address on December 25 to resolve the problem of wage and pensions arrears. He said that preventing tax evasion and imposing stronger state control over the sale of alcoholic drinks could provide the required funds. (Russian Radio, December 25) The following day, the president chaired a meeting of the Emergency Commission set up to improve tax collection. The meeting decided to restore the state monopoly on the sale and production of alcohol. This does not mean that the 700 Russian plants that produce alcoholic beverages will be re-nationalized, but that round-the-clock excise posts will be set up at these factories and that measures will be taken to tighten controls on imports of alcoholic drinks. This applies particularly to the flow of cheap vodka from neighboring Belarus and Ukraine. Yeltsin’s chief aide, Anatoly Chubais, said the state was losing millions of dollars in revenue on alcohol sales and that the re-imposition of a monopoly would enable the state to make good on pension arrears to Russian citizens. (Itar-Tass, NTV, December 26)

Former finance minister Boris Fedorov pointed out that a state monopoly on alcohol production has in fact been in existence since 1993 but that until now the Russian government lacked the political will to enforce it. "Had I been at the meeting," Fedorov said, "I would have asked those present about the implementation of Presidential Decree No. 918 (signed in 1993) ‘On Restoration of the State Monopoly on the Manufacture, Storage and Sale of Spirits.’" Fedorov said the 1993 decree was never implemented because the Agriculture Ministry — rather than the Finance Ministry that he headed — was made responsible for enforcing it.

Fedorov leveled several criticisms at the latest decision. One was that the exchequer is losing revenue not only on the sale of alcohol but also through "loopholes and inefficiency" throughout the tax system and, in particular, through a failure to collect duty on oil and gas, arms, and precious metals. Second, Fedorov argued that "Russians consume more alcohol than anyone else; we are destroying ourselves." He said that instead of enforcing taxes across the board, the state should be trying to discourage people from drinking hard liquor by removing taxes on beer and wine. Fedorov also warned that state ownership "is a guarantee of low quality and fraud." (Rossiiskie vesti, December 31)

Draft Federal Budget Is Approved, but IMF Has Less Welcome News for Moscow.