Colombian Sales May
Suffer Under Higher `Vice' Tax
BOGOTA (Dow Jones) - SABMiller's sales in
Colombia may suffer after the government
raised the sales tax on beer to 14% from its
current 3%, the company said Friday.
SABMiller's local unit, Bavaria SA, will
raise the price of beer by about 100 pesos
(5 U.S. cents) per bottle and cut operating
costs in response to the tax hike, company
spokesman Nigel Fairbrass, told Dow Jones
Newswires.
SABMiller is by far Colombia's largest
brewer, with a 97.5% market share.
"While we expect a modest impact on sales,
we'll take mitigating actions across the
business to reduce costs and preserve profit
growth," Fairbrass said.
These measures may include job cuts,
Fairbrass said.
The new tax will take effect from Feb. 1,
and will rise again to 16% on Jan. 1, 2011.
On Friday, Colombia's Finance Minister Oscar
Ivan Zuluaga announced tax increases on
beer, cigarettes, liquors, wines and
gambling to pay for expected rising spending
of state-run health insurance.
"The government decided to focus on sectors
that have financed health throughout the
history of the country. They are what we
call 'vices'", Zuluaga said.
Bavaria spoke out strongly against the tax
hike.
"The finances of the health system are
increasingly dependent on the brewing
industry, which is inadequate, not to say
unjust," Bavaria said in a statement. "We
consider it inappropriate to use emergency
legislation to deal with chronic problems.
Achieving a sustainable health system, based
on universal coverage, is a huge task for
any society."
The new tax system unfairly favors strong
liquors over beer, Bavaria said.
In Latin America, SABMiller's lager volumes
grew by 4% in the third quarter, with
Colombia in particular growing 6%, due in
part to hot weather.
Bavaria reported a consolidated net profit
up 41% on year to 190 billion Colombian
pesos ($97 million) in the third quarter of
2009. SABMiller controls about 99% of
Bavaria.
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