Efes concerned over beer excise plans in Ukraine

The 5th largest brewer in Europe by volume Efes expresses serious concerns over the plans by the Ukrainian MPs to sharply increase beer excise, in the middle of financial year and without any prior notice.

A group of MPs in the Ukrainian Parliament have recently put forward a Bill (# 2876) suggesting to increase the excise on beer almost three times: from the current 0.87 UAH (Ukrainian Hryvnias) per litre to 2.50 UAH per litre. The excise on other alcohol drinks, including strong spirits, is to remain intact. According to the Bill, the new excise on beer is effective from 1 June 2013.

This initiative clearly contradicts the current Tax Code and Budget Code legislations in Ukraine, which prescribe that any changes to any taxes should be made with at least six months’ prior notice, and no tax changes are allowed during the budget year.

Alejandro Jimenez, Efes Beer Group President, comments: “Any tax increase should follow three main principles. Firstly, it should be reasonable, and not a sharp manifold increase. Secondly, it should be logical, i.e. have some rational explanation behind the rate of increase. And thirdly, it should be predictable, to allow businesses to plan their activities accordingly. The suggested initiative meets neither of these criteria: the threefold increase in excise is very sharp, has no logical explanation behind it, and jeopardises business planning by introducing the new excise rates in the middle of a budget year.

Moreover, we believe alcohol abuse might increase as higher taxes on beer with unchanged taxes on strong spirits will steer consumers towards strong and illicit alcohol. We would welcome a stable legislation, allowing long term business planning for the ultimate mutual benefit of the investors, the Ukrainian state and the Ukrainian society.

We would also welcome the development of an overall national strategy of dealing with public health issues related to the consumption and abuse of alcohol. Such strategy, we believe, should be based on the recommendations of the World Health Organisation and the best European practices in this area. Part of this strategy can be the excise policy, outlining the country’s long term approach to regulating excise for a whole range of alcohol drinks in a balanced and systematic manner. Such approach is, in our view, the most efficient way forward.”