Belarus raises VAT on sugar to 24% to restrict Russian imports

MINSK. Sept 3 (Interfax) - Belarus has raised the value-added tax rate on white sugar to 24% from 18% starting from September 1, a source in the Taxes and Duties Ministry told Interfax.

The Belarussian Economics Ministry said the hike would not lead to changes in fixed sugar prices.

Belgospishcheprom, the Belarussian state food concern that initiated the VAT hike, and the Finance Ministry refused to comment on the reasons behind the hike.

Experts say the rate was raised to lower the economic appeal of importing sugar from Russia due to Moscow's restrictions on imports of Belarussian sugar. Belarus has fixed sugar prices that are higher than Russian sugar prices and this has led to increased imports from Russia, which, in turn, lowers the profits of Belarussian producers. At the same time, the VAT hike will not impact exports of Belarussian sugar to Russia because a zero VAT rate for exports is in effect.

Belarussian sugar plants have begun processing sugar beets from the new harvest. The sugar beet harvest is estimated at 4 million tonnes, of which about 430,000-450,000 tonnes of sugar can be produced. The Belarussian market consumes 360,000-370,000 tonnes of sugar per year.

Belarus has pledged to restrict exports of sugar produced from sugar beets to Russia to 180,000 tonnes in 2007 and 100,000 tonnes in 2008.