ABI nixes 140% tax hike on low priced brews

MANILA, Philippines–Asia Brewery, Inc. (ABI), maker of popular brands Beer na Beer and Colt 45, is opposing a proposed measure that will slap a 140-percent tax increase on low-priced beer, stressing that it will adversely impact its low-income consumer base.

In a statement issued Monday, ABI said under the Department of Finance-sponsored House Bill No. 5727, low-priced beer – which comprises 75 percent of all current beer
brands sold in the market – will be slapped a 140 percent excise tax hike to P25 from P10.41 per liter. Meanwhile, the excise tax on high-end beer brands, including imported brews consumed by more affluent consumers, will only jump by 21 percent under the same proposal.

“The resulting price increases from the new tax imposition will lead to the collapse of ABI’s beer market. Worse, it will take with it a large portion
of the barangay-based distribution and retail businesses depending on the company,” ABI chief finance officer Enrique Martinez warned.

Instead of the single tax rate being pushed by DoF, Martinez urged lawmakers to maintain the multi-tiered tax system which he stressed is more progressive and takes into account the customer’s purchasing power. “The idea is simple: ABI believes it is unfair to impose the same tax on minimum wage earners who patronize low-priced brews vis-à-vis the rich who consume expensive beer brands,” Martinez said.

He stressed the DoF proposal is anti-poor since dampened demand will lead to lower tax revenues that will ultimately deprive the masses of basic government services. More importantly, he said the proposal, if passed, will cause massive job losses and loss of livelihood opportunities for thousands of poor families dependent on the distribution and retail sales of low-priced malt-based beverages.

Martinez said it will be recalled that when a 20 percent increase in excise tax was implemented in 2005 under Republic Act 9334, ABI’s volume removals and excise tax payments declined by 41 percent and 24 percent, respectively, from 2005 to 2008.

“If this is the effect of a 20% increase in excise tax on our beer sales, we believe a 140 percent tax hike will lead to at least 50 percent drop in ABI’s and the industry’s sales volumes. A volume decrease of this magnitude will threaten the viability of Asia Brewery and even the beer industry itself,” he said.

If this happens, Martinez estimates that thousands of workers in the manufacturing plants including allied industries such as transportation and logistics, and small distributors across the country will lose their jobs. Similarly, the business of over a million sari-sari stores will also be affected as low income consumers shun the resulting high priced beer in favor of unregulated alcoholic products, he said.