04 October, 2005

Malaysia: The latest increase in duties will lead to another rise in beer prices

This is the third successive year that the Malaysian Government is increasing the excise duty on beer and stout. The 27% increase in excise duty imposed by the Government in the 2005 Budget was the highest ever duty increase in the history of the country, The Edge Daily posted on October 3 according to Malaysian Budget 2006. The latest increase in duties will lead to another increase in the already high consumer price of beer and stout.

The Confederation of Malaysian Brewers said that while sales tax has been reduced to 5%, excise duty was increased by 23% and the Government has introduced an absolutely new VAT. This results in an increase of close to 9% in terms of additional duties to be paid and it will inevitably be passed on to the consumers.

This comes as a great disappointment after last year’s steep hike of 27% and the previous year’s 10% increase. “This increase will exert tremendous pressure on us as we are already operating in a difficult, challenging and highly competitive environment”, Confederation of Malaysian Brewers said.

The price of beer and stout in Malaysia is already one of the highest in the region, especially over the last couple of years. This duty increase will continue to widen the price differentiation of beer and stout with other markets in the region, particularly in the neighbouring countries. This will ultimately make smuggling of beer and stout far more lucrative and, therefore, more widespread and difficult for authorities to curb.

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