Christmas taxes - Hike on tonic wines, cigars but white rum, cigarettes escape
Published:Wednesday | December 1, 2010 | 12:00 AM
Arthur Hall, Senior Staff Reporter
Jamaicans will begin paying more for some alcoholic beverages and tobacco-related products, effective today.
The increased prices should hit consumers of some tonic wines, spirits, cigars and the increasingly popular 'beedies'.
However, there should be no change in the prices of beers, stouts, white overproof rum and cigarettes.
Registered players in the tourism sector should also escape the increased tax on alcoholic beverages.
Addressing Parliament yesterday, Finance Minister Audley Shaw confirmed reports published by The Gleaner that the Government had set its sights on an increase in the 'sin tax' to generate additional revenue.
But 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.
"We are not introducing new taxes. We are simply modifying the existing rates to achieve greater equity, simplicity and efficiency," Shaw told the sitting of the House of Representatives.
"We have, for some time, been very concerned about aspects of the taxes on alcoholic drinks, which we have found to be, in some instances, discriminatory, cause distortions and result in a loss of revenue," Shaw argued.
He said the way taxes are applied on some alcoholic products encourage irresponsible drinking by consumers.
This is a claim frequently made by persons who charge that the recent explosion of 'tonic wines' and alcoholic energy drinks reflects the lower taxes, which make these products cheaper and more accessible to youngsters even though they have higher alcoholic content than some beers and stouts.
"The Government will be implementing taxation based on the specific alcohol content of drink. Our goal is to have the same rate per litre of pure alcohol for all beverages," said Shaw in an announcement that should get applause at Red Stripe and its parent company, Diageo, which have long lobbied for this system.
Against that background, Shaw said the Government has decided to impose a single special consumption tax (SCT) based on the alcohol content at the rate of J$960 per litre of pure alcohol.
The Government has also decided to increase the ad valorem tax on some imported products, which could see their prices reduced if the single-content rate is applied.
"This rate will apply to beers, stouts, and wines, including beverages commonly referred to as tonic wines, cordials, liqueurs, vodka, whiskey, brandy, gin, underproof and overproof rum, excepting overproof white rum."
According to Shaw, this should result in no change in the prices of beer and stouts and should not affect registered entities in the tourism sector.
He said a similar restructuring was needed in the tobacco industry, as some products pay a much lower duty than others, resulting in unfairness and distortion.
"It is being proposed that in order to plug the loophole created by the different tax treatments of tobacco-related products a uniform tax treatment should be applied. Cigars, cigarillos and cheroots and other tobacco substitutes will attract the same treatments as cigarettes," Shaw said
That announcement was quickly endorsed by Christopher Brown, corporate and regulatory manager at Carreras.
"Carreras believes this is a basic levelling of the playing field, as products such as beedies, which have been taxed as cigars, will now attract the same tax as cigarettes," Brown told The Gleaner.
The Government expects to rake in $772 million between now and the end of the fiscal year from the tax changes.