FoodNavigator-Asia.com (RJ Whitehead) |http://goo.gl/gDzWH8
Sweetened drinks shouldn’t even be subject to excise duty, never mind an elevated sugar tax, according to the Indonesian drinks industry.
The chairman of the Soft Drinks Industry Association said such a move would result in massive job losses across the value chain and have little impact on public health in Indonesia, where the consumption of soft drinks is low.
The country’s finance ministry last month said it was considering plans to impose new taxes on sugar-sweetened beverages. These would apply to carbonated drinks and energy drinks in a bid to curb excessive consumption of sugar.
Ministers have not yet set any time frame for when the measure could be in place, if at all.
“Sweetened beverages should not be taxed as consumption remains very low/ They only account for 6.5% of the total calories consumed by residents of big cities in Indonesia,” said Triyono Prijosoesilo, referring to industry estimates that per-capita soft drinks stands at 2.4ml per day.
Up to 120,000 industry workers would stand to lose their jobs if a sugar tax were introduced, outweighing any health gains from the proposal, he added.
Research by the University of Indonesia’s Institute for Economic and Social Research suggests that an excise tax would raise IDR590bn (US$42m) annually.
Yet the same study also predicts it would lead to 64.9% drop in demand for soft drinks, leading to a net annual loss of around IDR673bn.
“There is no reason from health or fiscal perspectives [to introduce the tax],” said Adhi Lukman, chairman of the Indonesian Food and Beverage Association.
“In the end, we’ll only become a market. Indonesia will no longer be attractive as a production base.”
Beverage companies are wrestling with an economic slowdown in Southeast Asia’s biggest economy, where their industry was until recently seen as a growth market.
Among them, Australia’s Coca-Cola Amatil, has seen slowing volume growth in the first-half of this year despite having earlier reaffirmed a US$500m investment in the country.
The tax, which could make soft drinks eligible for an excise list of high-bracket tax items comprising tobacco and alcohol, “could be crippling for an industry that’s just getting started’, Martin Gil, head of Coca-Cola Indonesia, told The Australian.
A previous attempt to tax sweetened beverages failed in 2004 after it cripple manufacturers and resulted in job losses.
At US$6bn, Indonesia’s soft drinks industry is relatively small, especially for a market of 250m people, according to Euromonitor International.