Liquor protest in Jamaica

Sabrina Gordon, Staff Reporter

Liquor company J. Wray & Nephew yesterday said the Government should revisit the increase in tax that has been announced for alcoholic beverages, a move it says may not result in the collection of much-needed revenue.

"It is the consumer that ultimately pays, and in difficult economic times such as these, it is quite possible that an increase in tax rates could actually result in a decrease in tax collection," said David McConnell, managing director of the global marketing division at Wray & Nephew.

McConnell wants the Government to maintain the current ad valorem tax structure, one which he said has proven to be a fair and an efficient way for the collection of alcoholic revenue for the country.

But Finance Minister Audley Shaw left little doubt last night that the Government would not dance to Wray & Nephew's tune.

"They had a meeting with us and we have responded to them," Shaw told The Gleaner. He said the meeting was held last Saturday and added he would say nothing more at this point.

Wray & Nephew's call for the tax review comes a day after beer company Red Stripe threatened to pull its export business from Jamaica, complaining of unfair tax treatment favouring the production of spirits.

Shaw announced on November 30 that the Government would impose a single special consumption tax based on alcohol content at a rate of J$960 per litre of pure alcohol.

Inequitable shifting

Reviewing the new measure, McConnell said that it was inequitably shifting the burden of tax from lower-priced, locally produced spirits and wines while reducing the tax revenue that can be obtained from beers and stouts.

"Beers and stouts benefit from a reduction in tax, with brands such as Red Stripe receiving a reduction in tax of 17.4 per cent and Red Stripe Light benefiting from a tax reduction of 53.5 per cent," McConnell told journalists yesterday evening at a press conference.

Since last week, Wray & Nephew has not serviced the local market, saying that there is still a lot of confusion on the current rate of tax for the different categories.

While supply to the hotel industry has resumed, the general trade is still not being supplied.

McConnell said that this will remain until adequate consultation is held with the Government and relevant bodies.

"The purpose of these consultations is to lend our perspective on the implications of any new measure," said McConnell.

"And the objective of the meetings is to get a more fair and equitable taxation package while still allowing the Government to achieve its revenue targets," he said.

McConnell said the Jamaican consumers who are already feeling the effects of a recession, as well as the hotel sector, would be severely affected by the Government's latest tax package.

Call for amendment

While J. Wray & Nephew said the company will absorb the tax on underproof spirits, the tax on tonics and fortified wines will be transferred to consumers.

Wayne Cummings, president of the Jamaica Hotel and Tourist Association, also supports Wray & Nephew's position.

"... It is a challenge to the hotel sector if at every turn there is a new tax for an industry which the Government itself describes as an important industry," said Cummings.

"The hotel sector needs to be protected for it to become competitive and smarter in the way it does business so that it can actually collect that revenue," he said.

Cummings estimated that the impact on the sector from the new tax measure will be approximately $650 million per annum.

The Opposition has also called for the Government to resolve the impending crisis now being caused by the new tax regime.

"The new measures were imposed with absolutely no prior consultation with most, if not all, of the major manufacturers in the industry," said Opposition Spokesperson on Industry and Commerce, Mark Golding, in a statement to the press.

"This breakdown is costing the country millions of dollars each day in lost tax revenues, while simultaneously devastating a dynamic local manufacturing industry in what should be their best time of year for business," Golding said.