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Level the playing field - Private-sector group urges Government to place uniform tax on liquor

Published:Sunday | April 22, 2012 | 12:00 AM
Jody, from London Pub in the Corporate Area, serves up some popular alcoholic beverages to her customers. - Norman Grindley/Chief Photographer

Arthur Hall, Senior Gleaner Writer

If the Government accepts the Private Sector Working Group's (PSWG) proposal to change the tax regime on alcoholic beverages, local consumers could see increases in the price of some products while the tourism industry could face a rise in the price it pays for imported liquor.

However, the proposal, if accepted, could see a levelling of the playing field and give local producers of alcoholic beverages a better chance of competing against foreign producers.

The PSWG has suggested that a single uniform rate of the Special Consumption Tax (SCT) should be applied to all alcoholic beverages.

According to the PSWG, the SCT on alcoholic beverages should be computed at a prescribed dollar value per litre of pure alcohol content and indexed for inflation.

Under the present regime, beers and stouts attract an SCT of $1,134 per litre of pure alcohol, while overproof white rum is taxed at a rate of $450 per litre of pure alcohol, and other alcoholic beverages, including wines, liqueurs and cordials, attract an SCT of $960 per litre of pure alcohol.

While the PSWG's proposal does not include a suggested rate for the uniform SCT, some industry insiders have long argued that a flat rate of $1,040 per litre of alcoholic beverages could yield a further $1 billion in revenue for the Government.

That is a figure similar to the revenue gains that the PSWG projects even though, it says, "the applicable rates to yield such revenue are currently in the process of being determined".

However, with the introduction of a uniform SCT, some consumers of alcoholic beverages, particularly rum drinkers, would almost certainly see a price increase.

Consumers lose

That is a concession the PSWG accepts as it notes that "consumers of alcohol" would be the losers under its proposal.

The PSWG has also recommended a withdrawal of the special concession currently afforded to the tourism sector on the importation or purchase of alcohol.

The PSWG is proposing that alcoholic beverages be subject to a standard form of taxation across the board, irrespective of who purchases it.

That is a proposal certain to get opposition from the tourism industry which has distanced itself from the private-sector groups which have submitted the tax reform proposals to the Government for consideration.

In the meantime, importers of cheap alcohol could see an increase in the rates of Customs Duty and/or additional Stamp Duty in what the PSWG says is an effort to enhance local trade protection.