What Can We Expect from Lowering Customs Duties on Butter?

Baku / 08.11.17 / Turan: Euphoria caused by the decision of the Cabinet of Ministers to reduce customs duties on imported butter and other oils made from milk can soon be replaced by disappointment.

Note that from December 2017, customs duties on the above products will be reduced from 15% to 5%. The decision will remain in effect until December 31, 2019.

Contrary to expectations of a sharp decline in butter prices in stores, in reality, the price will change very little.

Turan has already reported that customs duties are only one of the factors in the problem of high prices for butter. The main factor, however, is the monopoly on imports, which is concentrated in the hands of a narrow group of individuals. That is why similar goods are sold much more expensively than in neighboring countries http://www.turan.az/ext/news/2017/-/free/markets/en/118404.htm.

The economist Gubad Ibadoglu said on his Facebook page that according to official figures, one kilogram of New Zealand butter is imported into the country for 5 manat 34 gapik, and after a decrease in duties, the price may change on average by 63 gapik per kilogram.

He pointed out that butter is imported to Azerbaijan from 15 countries. New Zealand, which accounts for 85% of these imports, is the leader among the countries supplying butter to Azerbaijan.

The cheapest butter is imported from Estonia - 2.62 dollars per kilogram, and the most expensive is imported from Luxembourg - 10.18 dollars per kilogram.

At the current rate, the import of New Zealand butter costs 5 manat 33 gapik. As a result, it turns out that the average price per kilogram of butter is 6 manat 80 gapik.

"The Customs Committee states that on average the import of butter is 8 manat 84 gapik per kilogram. Maybe they take into account VAT. Even if you include VAT (18%), the New Zealand butter, which passes through customs for 5 manat 34 gapik (according to the old 15% tariffs, 80 gapik should be added, which makes 6 manat 14 gapik, and then VAT amounting to 1 manat 10 gapik should be added, so it should cost 7 manat 24 gapik," Gubad Ibadoglu wrote.

Concerning the real reduction in prices in stores, the expert believes there will be no sharp collapse.

"On average, customs duties on butter will decrease by 63 gapik, which will not have a significant impact on retail prices. Maybe for a short time the retail price will fall by 50-60 gapik; then prices will return to their old, high level," he said.

Note that in October, between experts, in particular, Natig Jafarli and the Customs Committee, a discussion arose over the unreasonably high prices for butter. The expert accused the Customs Committee of having a monopoly on butter imports.

Jafarli demanded to explain why the difference in the price of New Zealand butter in Azerbaijan and Georgia is almost 40% (18 and 10 manat respectively).

After the decision of the Cabinet, Jafarli on his Facebook page noted that "now there is one unresolved issue - the creation of a competitive and fair environment." -71D-