New tax levelling the field, says Red Stripe

Hitting back at recent statements made by its rival, J. Wray & Nephew, Red Stripe yesterday said the new tax regime merely represented levelling of the tax playing field.

"This new system just brings a fair and level playing field. It is not perfect. White overproof rum pays a lower tax rate of $450 versus everything else, which pays $960 per litre of pure alcohol content; however, it goes a long way towards correcting the inequities that existed previously," said Richard Byles, chairman of Red Stripe, in a statement to the media yesterday.

Finance Minister Audley Shaw recently announced new taxes for some alcoholic beverages and tobacco-related products. The increased prices have affected tonic wines, spirits, cigars, and the increasingly popular beedies.

However, there should be no change in the price of beer, stout, white overproof rum, and cigarettes. Shaw told Parliament that the change was part of a continuing tax reform to "tidy up aspects of the system", and not only a revenue-generating measure.

Fairest way

Yesterday, Red Stripe said, "Taxing products based on alcoholic content is the fairest way of taxing alcohol and the right thing to do to promote a competitive industry as well as to enhance public health."

Byles was responding to statements made Thursday by J. Wray & Nephew calling on the Government to review the $960 per litre of pure alcohol content now proposed to be charged on alcoholic beverages.

Both companies are claiming that each of them is at a disadvantage with one or the other type of tax regime.

The regime being proposed is a single special consumption tax rate of $960 per litre of alcohol content to be placed on beverages such as beer and stout, wine and tonic wine, liqueur, vodka, whiskey, brandy, gin, and underproof and overproof rum, with the exception of white overproof rum.

White overproof rum will attract a specific special consumption tax rate of $450 per litre of pure alcohol.

The rate of US$0.40 per litre on wine and liqueurs imported directly or taken out of bond by hotels/resort cottages only will remain unchanged.

With the new measures becoming effective immediately, it is expected to yield the Government $618 million in tax revenues.

Prior to this proposal, alcoholic beverages were being taxed on an ad valorem basis, that is, a flat tax on the value of the good.

Special consumption rate

The ad valorem special consumption rate was set at 30 per cent and US$0.40 per litre, respectively.

Before the adjustment, Red Stripe contends that the applicable tax rate discriminated against its products.

"To put beer at a higher rate, as pertained prior to this adjustment, would be blatant discrimination against beer and would have very serious repercussions for our company," Byles argued.

But J. Wray & Nephew, which was seemingly satisfied with what previously obtained, now says that the new regime is not beneficial to the industry or its company.

J. Wray & Nephew is seeking dialogue with the Government to review the new measures.

The Gleaner understands that Prime Minister Bruce Golding asked Shaw to have his technocrats have a look at other tax options. However, it appears Shaw is reluctant to comply. He told The Gleaner Thursday night that he had already met with Wray & Nephew and he told them what the situation would be.