Asrim against excise taxes on soft drinks

JAKARTA (JP): The Association of Indonesian Soft Drink Producers (Asrim) opposed on Thursday the government's plan to introduce excise taxes on soft drinks.

The association's chairman Mugijanto said that imposing excise taxes on "price-sensitive" products such as beverages would be conterproductive.

Collecting a 25 percent excise tax from the sales of beverages could result in a rise in prices of at least 30 percent, he said, adding that the higher pries could cut total sales of soft drinks in the country by about 35.7 percent.

"It means any plans to impose excise taxes on soft drink products would be conterproductive for the government because it would drain out its revenue base," he told a media briefing.

Mugijanto said the calculated 30 percent increase in prices took into account the government's decision to raise fuel and electricity prices beginning next month.

The estimated 35.7 percent decline in beverage sales would translate to a loss of revenue by about Rp 297 billion (US$39.8 million) of the industry's estimated total sales in 2001, he said, quoting data issued by the Institute for Economic and Social Research (LPEM) of the University of Indonesia.

He further warned that the policy would ultimately result in mass layoffs, amounting to some 7,000 people within the beverage industry and over 30,000 people in related industries.

"This figure doesn't include street vendors selling our products," he said.

The government plans to impose a 25 percent excise tax on beverages as of April 1, but has delayed the move until next year following the association's protest.

The association has said the plan to impose excise taxes on soft drinks should be dropped for ever given its negative impact on the sources of state revenue.

The association's 23 members include producers of brands like Coca Cola, Pepsi, Teh Sosro, and mineral water Aqua.

According to Mugijanto, the government should not treat soft drinks in the same way as alcoholic drinks or luxury goods, which were subject to excise taxes.

In addition, excise taxes would impede the industry's growth, citing that the nation's consumption of soft drinks was way below that of neighboring countries like Malaysia and Thailand, he said.

He expected a double digit growth in the industry over the next five to 10 years if the government did not burden the industry with more taxes.

Besides from postponing the imposition of excise tax on beverages, The Directorate General of Custom and Excise also delayed excise taxes on the cement and tire industries.

Opposition from the industries' associations forced the government to reconsider its decision. (bkm/07)