TAXMAN’S STING: Excise Manoeuvre Raises Alcohol Price Up to 40%

The Bali Times

A MARCH 17 manoeuvre by the finance ministry, raising the excise tax on liquor, has wiped out the cost savings consumers could have expected from the scrapping of luxury tax on alcohol announced just last week and could lead to prices rising by up to 40 percent.

The high price of imported premium liquor is cited by Bali’s hotel sector and the tourism industry as a disincentive to travel here.

Indonesian producers who applauded the move to scrap the luxury tax on their products from April 1 are now incensed over the government’s sudden decision to increase the excise tax as much as threefold.

A Finance Ministry decree signed on March 17 but released only on Tuesday raised the excise tax on alcoholic beverages by 100 percent to 214 percent, depending on their alcohol content. The luxury tax currently imposed on alcoholic beverages ranges from 40 percent to 150 percent of their sales price.

“We appreciate the gover-nment’s efforts in scrapping the luxury tax on alcoholic beverages, but the increase in the excise is just way too much,” Ipung Nimpuno, a representative of the Indonesian Malt Beverages Association (GMMI), said this week.

He said the increase in the excise tax could undermine the objective behind scrapping the luxury tax: reducing the black market in alcoholic beverages.

“I haven’t figured out how much is the proper excise the government should charge in order to compensate for the scrapped luxury tax, but the current figure is too much,” Ipung said. He added that he expected prices of alcoholic beverages to increase by 20 percent to 40 percent with the new excise duty.

Nimpuno said the move was a massive blow to the local brewing industry.

“The government’s idea to bring in more income for the country is good but the execution of the new excise tax is inappropriate as it will create a bigger alcohol black market,” he said.

He said the black market already accounted for 80 percent of the trade in alcoholic drinks in Indonesia and the new duty would only hurt legal producers, who would be forced to increase prices.

Members of GIMMI, including producers of the local Bintang and Anker beers, would pay an additional Rp800 billion rupiah (US$88 million) in tax annually.

The government divides alcoholic beverages into three categories: type A, containing up to 5 percent of alcohol, type B, with 5 percent to 20 percent, and type C, with more than 20 percent.

The new decree raises the excise tax on domestically produced type A drinks from Rp3,500 (38 cents) per litre to Rp11,000. The excise on type B beverages is increased from Rp10,000 to Rp30,000 per litre and on type C beverages from Rp25,000 to Rp75,000 per litre.

Meanwhile, for imported alcoholic drinks, the excise for type A is increased from Rp5,000 to Rp11,000 per litre, for type B from Rp20,000 to Rp40,000 per litre and type C from Rp50,000 to Rp130,000 per litre.

The decree says the new excise tax rate is aimed at compensating for the expected drop in revenue from the abolition of the luxury tax on alcoholic beverages.

Ipung said that when the luxury tax was still in place, Indonesian brewers had been contributing about Rp4 trillion annually to the state coffers.

“With the luxury tax scrapped and the excise tax increased, we [GMMI] predict that beer producers will now have to contribute Rp4.8 trillion yearly,” he said.

Evi Suhartantyo, a spokes-man for the Directorate General of Customs, said the current level of excise duty for alcoholic beverages was “ideal.”

“Items that are charged with excise have their excise tax increased every year, because it is done to protect health and wellbeing.”

The Indonesia Hotel and Restaurant Association (IHRA) has also protested, asking the government to review its decision to impose high excise on alcoholic drinks, saying the policy will ruin the campaign to promote the country’s tourism.

“We urge the government to review the new excise tax on liquor.

Otherwise foreign tourists will be turned away by the higher prices,” IHRA chairwoman Yanti Sukamdani said.

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3 Responses to “TAXMAN’S STING: Excise Manoeuvre Raises Alcohol Price Up to 40%”

  1. peter Says:

    Typical of all governments they have no idea of what each department is doing. give with the left hand and then take with the right .People go to Indonesia to relax and enjoy them selves either with a beer/spirit or wine around the pool, at dinner, or just to try something different. that will now change. Tourist will bring in the allowance they are allowed by law and not buy from local business. Wake up Indonesia you are loseing the plot.

  2. John Says:

    I agree fully Peter. Australians in particular are sensitive to changes here (especially for the worse). Tourists come here because they can have a reasonably priced drink. The large number of ex-pats here will undoubtedly cut down bar/resto consumption. How can alienating both tourists and expats alike possibly be conducive???

  3. kevin Says:

    It seems to me that the powers that be in this country do there best to dissuade any tourists at all with the extortionate prices of booze and visa on arrival.
    The attraction of Indonesia being a great value destination to visit have long gone with many prices for food and drink now much more expensive than even the UK
    Wake up you idiots and smell the coffee and start to look after tourists instead of penalising them to visit your country.

    Will the last tourist to leave please turn out the lights !!!!!!!!!!

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