E-Malt.com News article: Malaysia: Malaysian brewers planning to ask the government to revise its taxation strategies

Fearing a possible hike in taxes for alcohol, Malaysia’s brewers are planning to send a memorandum to the government to revise its taxation strategies, as a pre-emptive measure to stave off a possible increase, The Malaysian Reserve reported on November 20.

Their argument is that a hike in excise tax would be counterproductive and would hurt the beer industry and help increase the consumption of contraband beers which are priced lower than locally produced beers.

Guinness Anchor Bhd’s (GAB) MD, Hans Essaadi said the local brewery manufacturing cost has increased by 10% since 2013 due to the new transfer pricing valuation which was implemented in Nov 1 last year.

“Ad valorem tax is only imposed on the manufacturing costs of imported beers. For locally produced beers, ad valorem tax is imposed on the manufacturing costs, advertising and promotional costs as well as on the royalties.

“This has resulted in a switch in demand to imported beers, namely contraband beers which have successfully evaded tax and are priced 25% to 40% lower than locally produced beers,” said Essaadi.

Essaadi said the government should maintain and enhance its enforcement activities against contraband as its recent efforts have improved the industry’s revenue.

“Instead of increasing tax to increase its revenue, the government may look at collaborating to protect the brewery industry, thereby increasing the volume sold which would eventually increase the government’s revenue,” said Essaadi.

Federation of Malaysian Consumer Associations’s CEO, Datuk Paul Selvaraj said the government expects to collect RM8 billion of revenue from the implementation of goods and services tax (GST), of which RM1.8 billion from the brewery industry, signifying the importance of the industry on the government taxation revenue.

Paul suggests that the entire cost of food and beverages should be considered, as food constitutes a bigger portion of the low and middle class individuals, resulting in wide income disparity.

From mid-2013 to mid-2014, government collected RM84 million of tax revenue from the brewery industry.

The Beer Factory’s owner, Kent Chua said the overwhelming cost in the brewery industry has led to many small-scale pubs closing down, leading to a loss of employment.

“For 2014, there have been more pubs closing down than the last five years in total. There have also been many outlets that are selling below cost,” said Chua.

A distributor of GAB, Joo Seng Sein Kee’s Business Development Manager, Freedie Leong said the sluggish outlook for entertainment outlets as a result of price increase has led to distributors bearing bad debt and slow business growth.

“Instead of doing frequent raids that would reduce the consumption of brewery, the necessary authorities should focus on curbing the entry of contraband beers,” said Leong.

Sid’s Pubs Group Owner, Geoff Siddle said ultimately the job market suffers as pub outlets shut down and there are 14,000 beer outlets in the country, which are currently providing many job opportunities.


21 November, 2014