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Tax hikes could drain beer market

BREWERS are bracing themselves for the second rise in duty on beer this year, in a move that will make beer in Slovakia more heavily taxed than in the Czech Republic and Germany, countries that have similar beer cultures.
Brewers warn that the tax hikes, to be implemented from July, will mainly hit young people, pensioners, and poorer members of society, who make up the majority of Slovakia's many beer drinkers. In 2002, Slovakia ranked 10th in the world for beer consumption, drinking 93 litres per capita. The Czech Republic led the field with 159 litres per capita, while Germany was third at 148 litres per capita.
Beer producers say that the rise, which is equivalent to an extra Sk1 (€0.024) on each half-litre of beer, could further bring down beer consumption, already dropping after an increase in excise tax in January 2003. Bottled beer in shops now usually costs between Sk10 and Sk15 (€0.24 and €0.37) per half-litre bottle.


BEER drinkers may downsize.
photo: Brian Jones

BREWERS are bracing themselves for the second rise in duty on beer this year, in a move that will make beer in Slovakia more heavily taxed than in the Czech Republic and Germany, countries that have similar beer cultures.

Brewers warn that the tax hikes, to be implemented from July, will mainly hit young people, pensioners, and poorer members of society, who make up the majority of Slovakia's many beer drinkers. In 2002, Slovakia ranked 10th in the world for beer consumption, drinking 93 litres per capita. The Czech Republic led the field with 159 litres per capita, while Germany was third at 148 litres per capita.

Beer producers say that the rise, which is equivalent to an extra Sk1 (€0.024) on each half-litre of beer, could further bring down beer consumption, already dropping after an increase in excise tax in January 2003. Bottled beer in shops now usually costs between Sk10 and Sk15 (€0.24 and €0.37) per half-litre bottle.

"After January's increase in excise duty, there was a 10 percent drop in beer consumption," said Peter Švec, spokesperson for Heineken Slovakia, the country's largest brewery.

"We are disappointed with the results of coalition negotiations. We were expecting the government to abandon the idea rather than compromise on it," said Švec.

Brewers caution that if consumption continues to drop, smaller breweries could be seriously endangered.

"Stronger breweries will survive, while smaller ones will be severely affected," said the executive director of the Association of Producers and Malt Producers (SZVPS), Roman Šusták.

The latest measure, which will increase duties on beer from Sk300 (€7.28) to Sk500 (€12.13) per hectolitre, was the result of a government compromise, after Finance Minister Ivan Mikloš initially proposed raising beer tax to Sk1,000 (€24.27) per hectolitre, 10 times more than it was last year.

Although the increase is significantly less than the original Finance Ministry proposal, brewers are expressing concern at the speed of tax increases and what they say is uncertainty in Slovakia's tax system.

"Heineken is not happy that the government is changing the [tax provisions] so quickly and so often, and is not communicating those planned changes to foreign investors," said Švec.

While the main reason for the changes, according to the Finance Ministry, is to plug a hole in the current budget, brewers suggest that it is also part of a general attempt to harmonise European Union taxes on alcohol to limit smuggling between member countries. Some of the larger member states are against the measure, which was proposed last year.

Britain, one of the countries with the highest taxes on alcohol, has just introduced a freeze on rises in duty on beer, and has reported that it is considering introducing a reduced rate for smaller breweries.

Smaller breweries in Slovakia are pushing for a similar measure in Slovakia. Pavol Jurčík from the independent Poprad-based brewer Tatran proposed to the daily Pravda that brewers producing less than 200,000 hectolitres of beer annually should have a reduced tax rate.

"Our immediate neighbours the Czech Republic - plus Germany and Belgium, where there are 240 small breweries - [have discounted taxes]," he said, adding: "The culture of Europe has a multitude of tastes. It [would be a shame] to just 'homogenise' them with the chosen brands of a pair of large international companies."

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