Gov’t spikes tax on alcoholic beverages

A fresh wave of price hikes takes effect on Wednesday after the government revealed on Tuesday it will be targetting a range of alcoholic beverages in a move to improve tax collection.

Finance Minister Audley Shaw invoked ministerial powers to increase a special tax on mostly high end beverages effective Wednesday.

This is expected to rake in more than $600 million in tax revenue.

The domino effect

The government's move to spike the Special Consumption Tax on alcoholic beverages is expected to set off a bevy of price increases for beers, stouts and wines at wholesale and retail outlets.

The Finance Minister argued in Parliament on Tuesday that Jamaica falls at the bottom of the totem pole of countries that impose the per litre charge on alcohol at US$6.10.

The government's new revenue measure will see the tax man going after beverages including tonic wines, cordials, liqueurs, vodka, whisky, brandy, gin, underproof and overproof rum.

For these beverages the government has decided to apply what it calls a specific Special Consumption Tax rate based on their alcohol content....so the higher the content the more money per litre will be charged.

Hard liquor

Mr. Shaw went on to further explain how the government intends to raise $618 million from targetting hard liquor.

“A special regime will be put in place to maintain the existing SCT rate of 40 US cents per litre on wines, cordials and liqueurs imported directly or taken out of bond by only hotels, resort cottages registered with the Tourist Board and are processed through the Tourist Board and using the procedures that are set out by the Commissioner of Customs,” Mr. Shaw said.   

Mr. Shaw stated that there will be no increase for white overproof rum.

Meanwhile, there is to be an increase in the additional stamp duty on certain alcoholic beverages.

“It is being proposed that the current multiplicity of additional stamp duty rates on brandy, whisky, gin and vodka will be changed to a single ad velorem rate of 35%,”

“The reason why this is being done is that if you use the single rate of the alcohol content, it means that there will be a sharp reduction in the price of the imported whiskies and gins and vodkas and so on,” he said.

Caught off guard

Meanwhile, Wray and Nephew Limited, which is the island's lead distributor of wines and spirits, says it has been caught off guard by the new tax measures.

Up to late Tuesday night executives at the company were awaiting a formal notice of the new Special Consumption Tax rates.

“We are concerned that the industry has not been consulted, surely Wray and Nephew has not been consulted especially if we are being asked to implement taxation by midnight tonight,”

“We have not been provided with the full details of the taxation for implementation, so we are a little concerned. But as good corporate citizens we will do what is required once the correct information is provided to us,” said Greta Bogues, General Manager for Corporate Affairs at Wray and Nephew.

Levelled playing field

In the meantime, local brewer Red Stripe says it is pleased that the new measures have levelled the playing field with tax now being applied to tonic wines.

Managing Director, Allan Barnes, says it eliminates inequities which prevailed in the market.

“It's an agenda that we have been fighting in the public domain…since the inequities of the system, so we are pleased that it puts us on a level playing field with other brands to compete for the domestic consumer, so it’s good,” Mr. Barnes said.