The Confederation of Malaysian Brewers (CMBB) is recommending for no increases in excise duties and sales tax for
the upcoming tabling of Budget 2021, as such hikes are likely to be detrimental to Government’s revenue collections and further hamper business recovery of the many local businesses relying on beer as a source of revenue.
Any increase in excise duties is expected to further fuel demand for illicit alcohol. Instead of tax increases, CMBB is advocating strengthened enforcement over the illicit trade, comprising mostly imported beer with no duties paid. Based on Industry estimates, contraband beer makes up 14 percent of total beer volume in Peninsular Malaysia and 70 percent in Sabah & Sarawak as part of the country’s RM300 billion shadow economy and represents an annual revenue loss to the Government of more than RM1.1 billion.
Commenting on the situation, Roland Bala, Managing Director of Heineken Malaysia said: “The Covid- 19 pandemic is impacting the economy and consumer sentiment, we are seeing local businesses who depend on beer as a source of revenue struggling for survival. Many were forced to close down and cut their losses. We urge the Government to keep excise duties on beer at existing levels as we are concerned that any increase in taxes will only fuel illicit alcohol at the expense of legal tax-paying local businesses, including sundry shops, coffee shops, restaurants, supermarkets, bars, as well as hotels. As an industry, we are committed to supporting the Government in Malaysia’s journey to recovery. We take this opportunity to also urge for policy and decision-making to be done in consultation with industry, especially local businesses who will be directly affected by new policies and restrictions.”
Stefano Clini, Managing Director of Carlsberg Malaysia, added: “The illicit trade detracts billions of Ringgit in government revenue and from thousands of employees, distributors, retailers and investors who rely on legitimate beer sales as a source of income. As an industry, we believe any increase in excise duties and taxes will exacerbate the demand for contraband, which is particularly prevalent in East Malaysia.”
“Contraband beer also poses health and safety risks to consumers with zero oversight and regulatory control on its brewing, distribution, pricing, and alcohol content, unlike legitimate and licensed products brewed to exacting quality standards with natural ingredients. We thank the Government for their ongoing efforts in combating contraband hand-in-hand with the industry to the benefit of legitimate brewers and Malaysian businesses,” he added.
The wider impact to the industry was most keenly felt by the closure of F&B outlets since the MCO, where 11,000 businesses suspended operations leading to an estimated gross revenue loss of RM900 million while placing 110,000 jobs at risk. CMBB estimates that around 1,080 of these outlets are now permanently closed, impacting an estimated 10,700 jobs.
Apart from its recommendation for no further excise duty and tax increases, CMBB urges the Government to consider introducing support packages to help struggling operators of bars, and entertainment outlets who still remain closed since the beginning of MCO earlier this year.
It is estimated that around 3,800 of these outlets will remain closed at least until Dec 31 with some 38,000 jobs at risk. CMBB will continue to support affected outlets through its ongoing engagement with Government with an aim to create more awareness of the issues faced by local businesses and explore ways they can be allowed to operate in full compliance of SOPs with the health and safety of people being the first priority.