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Brewers hopping mad

SLOVAK producers of "liquid bread", as beer lovers dub their favourite beverage, complain of a catastrophic situation in their sector arising after last year's excise tax raise, which, they say, pushed the sales of beer to a five-year low.
However, the Finance Ministry points to subsequent tax compensations and argues that they cannot be responsible for poor marketing.

SLOVAK producers of "liquid bread", as beer lovers dub their favourite beverage, complain of a catastrophic situation in their sector arising after last year's excise tax raise, which, they say, pushed the sales of beer to a five-year low.

However, the Finance Ministry points to subsequent tax compensations and argues that they cannot be responsible for poor marketing.

The president of the Slovak Association of Beer and Malt Producers, Štefan Karšay, said at a press conference that beer sales for the first five months of this year dropped in an annual comparison by more then 15 percent and in May by 27 percent.

"The brewers are crying out for help because the situation arising after last year's tax increase is, to put it mildly, critical," said Karšay.

From January to May of this year, Slovak breweries sold 1.5 million hectoliters of beer, the lowest sales over the past five years.

If the trend continues, the brewers expect an annual drop of up to 500,000 hectoliters of beer, which represents almost the total yearly production of one large Slovak brewery.

According to the association's president, the guilty side is clearly the Finance Ministry, which twice raised the excise tax on beer last year in January and August.

Karšay said that the first excise tax increase was accepted by breweries: "The market could still absorb this change, but the second one is, in our opinion, liquidating."

At the point of the second raise in excise taxes, the ministry argued that it was necessary in order to fill a gap in the state budget.

"Bearing in mind that the state budget gap was not as big as the ministry expected, we are rightly expecting that now the minister will play fair and agree that he made a mistake," said the association president. "He will then return the excise tax to the minimum level required by the European Union."

However, according to the Slovak Finance Ministry, it is not possible to blame the government alone for the recent substantial drop in sale of beer in Slovakia.

"To attribute the problem of incorrectly chosen marketing to the state is misleading, especially if, in real terms, beer consumption continually increases," said Peter Papanek, adviser to the Finance Minister.

According to Papanek, no group of beer and malt vendors or producers in Slovakia is enjoying any advantages and the rules the are same for all of them.

Concerning the increase of excise tax from last August, Papanek said that the government subsequently compensated the vendors by cutting the income and dividend tax.

"This move was not criticised by any corporation or interest group," he added.

However, the advisor said at the same time that the Ministry is willing to negotiate with the brewers about their proposals, provided they do not contradict the philosophy of tax reform, i.e. shifting the weight from direct taxes to indirect ones.

The brewers want to push through a cut of excise tax on beer from the present Sk50 (€1.25) to roughly Sk30 (€0.75) for hectoliter.

The association representatives are planning talks, hoping to persuade the government that the excise tax is unjustifiably high so that the governments cuts the tax to the level required by the European Union.

Moreover, the excise tax bill can be opened after six months, an option which the brewers want to pursue through the opposition and independent deputies if cabinet talks fail.

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