'Un-beer-able' - Red Stripe, Wisynco angered by Shaw's revised alcohol tax measures
Published:Thursday | December 16, 2010 | 12:00 AM
Daraine Luton, Senior Staff Reporter
Finance Minister Audley Shaw's about-turn on alcohol tax measures has incensed local beer producer Red Stripe, as well as a major player in the local energy-drink market.
Yesterday, Red Stripe warned that it would be forced to increase the price of its products after the holidays.
At the same time, the beer company stressed that it would be relocating its export business from Jamaica within the next six months if the Government fails to roll back the amended tax measures announced Tuesday night.
Marguerite Cremin, head of corporate relations at Red Stripe, said the company has no option but to increase its price in the new year, following the decision by Finance Minister Audley Shaw to impose a revenue-neutral rate per litre of pure alcohol on beers and stouts.
"They are biting the hands that feed them ... it is absolutely insane," Cremin declared, while lashing the finance minister for reversing a decision he announced on December 1 to level the playing field in the alcohol and spirits market.
"This is absolutely crazy. The minister spoke to the fact that he was doing this for the good health of the country. However, what he has done was to reverse what he did on December 1, which was a major step forward in terms of a level playing field," Cremin said.
On the matter of the export business, Cremin claimed that pulling out of Jamaica could lead to 300 job losses, $150 million in PAYE losses to the Government, as well as reduced general consumption tax collection.
"We want to keep it in Jamaica and so we are asking the Government to reconsider this, because it is really a terrible situation that they have put Red Stripe in. The repercussions if we have to move the export business are horrible," Cremin said.
Shaw on Tuesday moved the tax on beer and stouts to $1,134 per litre of pure alcohol, reverting from the $960 duty he imposed earlier in the month.
The increase brings the tax on beers and stouts back in line with the cess on spirits such as those produced by Wray & Nephew.
The finance minister appeared to have been forced into revising the measures by pressure from Wray & Nephew, which branded the December 1 measures unfair. The latest revenue measures will earn the Government $60 million, leaving a $100-million hole in the Budget. Shaw said that gap would be plugged through an increased compliance and collection drive by the Inland Revenue Department and Jamaica Customs.
Yesterday, Greta Bogues, general manager for the corporate affairs division at Wray & Nephew, told The Gleaner that her company did not view the revised tax measures as a victory.
"We have to achieve certain revenue targets as a country, and what we want is to ensure that consultation is held with the entire industry to ensure that objective is achieved," Bogues said.
She said that, despite the adjustments, Wray & Nephew's business has been significantly impacted.
"Our prices have gone up. There is nothing on the ministry paper that has been rolled back for Wray & Nephew products," Bogues said.
Meanwhile, Cremin said Red Stripe has been thrown into a disadvantageous position and warned that a price increase would result in approximately $370 million in lost revenue to the Government.
"The relatively level playing field has been completely destroyed and we are thrown back into a discriminatory tax position. What they have done is to ensure that our volume will decline," she said.
"We have not taken a price increase in 18 months. At a rate of $960, where we were on December 1, we were going to swallow the increased costs and keep the prices level. Now that we are back up to a $1,134 rate, we will have to take a price increase. This will mean that our volume will go down by a million cases, which means that the Government would earn 20 per cent less revenue based on the lost volume," Cremin argued.
Meanwhile, among the revised measures announced by Shaw on Tuesday is a 15 per cent special consumption tax to be imposed on certain high-energy non-alcoholic drinks, such as Monster and Red Bull.
William Mahfood, managing director of Wisynco, which distributes its own energy drink, Boom, as well as Red Bull, said Shaw's move was a knee-jerk reaction.
"We were very surprised that the Government would try to impose a tax on energy drinks," Mahfood said yesterday.
"I am tired of being taxed. I am tired of taxation without representation. This Government has taxed the consumers of this country to the point of breaking. The worst part is that, as a people, we are not getting what is due for the tax."