Abkhazia removes tax that destroyed wine exports

Abkhazia removes the excise tax

The Abkhazian parliament will abolish the excise tax on winemaking materials. In the three months since this tax has been in effect, the export of local wine has completely stopped, and the budget has lost over 100 million rubles [over $1 million].

“Winemaking material” is a term in winemaking that refers to natural wine obtained after processing grapes. In simple terms, any wine is considered winemaking material until it is processed into a finished product and bottled.

The “Excise Law,” introduced in Abkhazia in January 2024, imposes a tax on winemaking materials imported into the republic at 30 percent of their cost. The authors of the law hoped it would help fill the treasury, but the result was the exact opposite.

Due to the new tax, by the end of January, one of the largest taxpayers in the republic, “Wines and Waters of Abkhazia,” halted its operations. The excise tax automatically affected the price of their products, and distributors refused to sell them at the new prices.

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“Wines and Waters of Abkhazia” owns famous Soviet-era Abkhazian wine brands like “Lykhny,” “Psou,” and “Bouquet of Abkhazia,” which are very popular in the Russian market. Out of 28 million bottles of wine produced last year in Abkhazia, only one million were sold locally, with the rest exported to Russia.

However, the company’s own vineyards do not produce enough grapes for such volumes of wine. Therefore, additional winemaking materials are purchased from outside.

The government-imposed excise tax increased the cost of wine production and made it unprofitable. “Wines and Waters of Abkhazia” stopped their factory operations, just like other wineries that focused on export.

According to Abkhazian economist Akhra Aritava, the wine excise tax has already caused the republic’s budget to lose over 100 million rubles, “and that’s not counting the winemakers’ own losses.”

To correct their mistake, at an extended session of the parliamentary committee on budget, credit organizations, taxes, and finance, the deputies unanimously decided to exempt the import of winemaking materials from excise duty entirely. In the next session, the parliament will officially approve this amendment to the “Excise Law.”

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