# _Excises_

Excises are levied on alcohol, tobacco, and fuel for motor vehicles. Excise rates are set to physical units and the government tends to review them regularly due to high inflation rates. Thus, we calculated excise payments of households based on quarterly files of HBS.

HBS files contain information on household expenditures on excise goods. However, households tend to underreport related consumption. The gap between expenditures on _alcohol_ reported by households and its actual consumption based on the retail trade turnover is especially high: alcohol expenditures reported in the HBS are only about 25% of retail sales of alcohol. It implies that HBS data needs an adjustment to retail trade statistics in order to receive reliable volume of excises paid by households.

We have HBS data on the total amount of alcohol expenditures on the one hand, and sales/average prices/excise rates by types on the other. Based on data on alcohol retail sales, its average prices, and respective excise rates, we estimated shares of excise taxes in retail prices by alcohol type. Next, we made an assumption about the structure of alcohol consumption by different types of households. We assumed that the cheapest alcoholic beverages are consumed by the poorer households, and shares of more expensive alcohol are growing with household income, distinguishing between quintiles of households by their expenditure (see Table 4). Having the retail trade data on sales of different types of alcohol and given assumptions about the structure of alcohol consumption by quintiles, we estimated total alcohol expenditures by household quintiles. Dividing imputed alcohol expenditures by HBS alcohol expenditures for every quintile, we got quintile-specific “alcohol expenditure underreporting coefficients” (see Table 5). Assuming that every household in a particular quintile that reported alcohol expenditures has the same “bias”, we imputed alcohol expenditures as _EXPialc_  _miq_ , where _EXPialc_ is initially reported expenditures on alcohol of household _i_ from quintile _q_ , and _miq_ is quintile-specific alcohol expenditure underreporting coefficient from the Table 5. Consequently, the amount of alcohol excises paid by household _i_ was calculated as _EXialc_  _EXPialc_  _miq_  _dEX q_ , where _dEX q_ is the share of excises in expenditures on alcohol by quintile from the Table 4.

**Table 4. Assumptions and inputs for estimating household payments of alcohol excises**

||**Vodka**|**Liquers**|**Wine**|**Fruit wine**|**Cognac**|**Sparkling**<br>**wine**|**Low alcohol**<br>**beverages**|**Beer**|
|---|---|---|---|---|---|---|---|---|
|**Share of exci**<br>|**se tax in reta**<br>|**il prices of alco**<br>|**holic bevera**<br>|**ges, %**<br>|||||
|1<sup>st</sup>quarter|43.1|32.6|7.6|36.9|20.5|9.6|28.0|17.5|
|2<sup>nd</sup>quarter|44.1|32.9|7.3|36.9|19.8|8.4|27.5|16.6|
|3<sup>rd</sup>quarter|44.2|29.2|7.8|39.0|18.2|8.8|27.2|16.1|
|4<sup>th</sup> quarter|43.9|30.0|7.8|39.0|17.9|8.5|27.2|15.6|
|**Structure of**<br>|**alcoholic bev**<br>|**erages consum**<br>|**ption by qui**<br>|**ntiles of populati**<br>|**on, %**<br>||||
|1<sup>st</sup>quintile|0|0|0|100|0|0|0|0|
|2<sup>nd</sup>quintile|30|0|0|0|0|0|0|30|
|3<sup>rd</sup>quintile|30|0|25|0|0|50|0|25|
|4<sup>th</sup>quintile|25|40|25|0|0|25|100|30|
|5<sup>th</sup>quintile|15|60|50|0|100|25|0|15|
|**Total**|**100**|**100**|**100**|**100**|**100**|**100**|**100**|**100**|

_Source_ : own estimates based on Belstat (retail prices for alcoholic beverages) and Ministry of Taxes and Duties (excise tax rates for 2015); own assumptions.

Expenditures on _tobacco_ and _fuel for motor vehicles_ reported in HBS files are also below levels in retail sales data. This discrepancy can be attributed to the widespread cross border trade in cigarettes and gasoline/diesel with EU countries. Hence, unlike in the case of alcohol products, there is no need to adjust consumption expenditures of households on tobacco and fuel for motor vehicles to the retail statistics.

In order to estimate tobacco excise payments, we calculated the average weighted share of excises in consumer prices of tobacco products. The weights for tobacco products (cigarettes with filter, cigarettes without filter, imported cigarettes with filter) were taken proportionally to their share in the consumer price index. According to our estimates, the share of excises in expenditures on tobacco equaled to 31.9% in 2015.

Estimates of fuel excises were based on the structure of fuel expenditures reported in HBS files and shares of excises in gasoline and diesel prices (13.4 and 7.6%).

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