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Categories
| Carlsberg calls for freeze on excise tax |
| Business & Market 2009 | |||
| Written by Fong Min Hun | |||
| Thursday, 27 August 2009 11:08 | |||
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With the present fiscal deficit expected to creep beyond the 6% of gross domestic product after the government’s fiscal stimulus spending spree, brewery companies are concerned that the government would be raising taxes to increase revenue. Although tax observers have been calling on the government to implement a 5% goods and services tax, the politically unpopular move is unlikely to see any significant development during this year’s round of budget deliberations. With that in mind, Carlsberg has taken the initiative to lobby the government to leave the excise tax hike for beer and stout unchanged when it delivers its budget address in October. “What we’re trying to say is that the government did not increase excise taxes the last three years, and would ask them to not increase them this year,” said Carlsberg’s managing director Soren Holm Jensen at a roundtable discussion with industry players on excise duty here yesterday.  Instead, the government should look at harmonising tax rates for other alcoholic beverages such as compounded hard liquor, which is sold at a much cheaper relative price than beer in stores. Jensen said that any increase in the price of beer could encourage alcohol drinkers to turn to cheaper compounded hard liquor beverages, which could work against the government’s policy of promoting responsible drinking. Presently, the excise tax works out to about RM7.40 per litre of beer. “Including VAT (value added tax) and sales tax, it comes up to about RM3 of tax per can of beer, or RM70 for a case,” he added. The situation was also made worse by the excessive smuggling of beer into the country, which has grown worse steadily. Jensen said the Malaysian government had to clamp down on smuggling and retain current import duties to keep the price of locally produced beer competitive. “Malaysia has very price competitive market in other categories, but beer is expensive,” he said. “The price of beer is already excessively high — don’t make it higher.” According to Carlsberg, Malaysia’s excise tax on beer is the highest in Asia and second highest in the world after Norway. Hong Kong, for example, does not impose a custom duty on imports or excise duty on locally produced beverages. Singapore’s excise duty is also 30% to 40% lower than Malaysia’s. The comparatively higher price of beer could affect tourism levels in the country because the price of food and beverage was a consideration for potential tourists, Jensen said. Meanwhile, UOB Kay Hian’s head of research Vincent Khoo, who was invited to brief the attendees on the state of the economic recovery, said the recovery would not likely be V-shaped. Khoo said that though the so-called “green shoots” of recovery were clearly apparent from leading indicators, there remained questions over whether private consumption had recovered sufficiently to take over once fiscal pump-priming stopped. Moreover, there was the danger of inflationary pressure, given the huge amount of spending by governments. Speaking on the fast moving consumer goods (FMCG) sector, he said there had been a fair bit of improvement on FMCG consumption since last February. This included demand for durable goods such as automobiles. This article appeared in The Edge Financial Daily, August 27, 2009.
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