The luxury tax on alcohol to be abolished, while consumers are not expected to benefit.
Bottles and Mugs!
Serious fans of beer were buoyed by Metro TV news as the Hindu holiday Nyepi drew to a close, for it was announced that the hefty tax on alcohol was to be scrapped.
But we’d scarcely cracked a celebratory bottle when a new report on the 16th brought us back down to earth with a bang – as usual, the customers are to get the shoddy end of the stick!
‘ Industry players and analysts on Tuesday welcomed the government’s decision to scrap a luxury tax on alcoholic beverages from April 1, but they doubted it would bring down the sales price. Currently, imbibers pay as much as 500 percent in taxes for their drinks.’
Well, let’s see. Utilising my O Level Arithmetic, 500% means if the price for a bottle of…Jim Beam, just suppose…is ‘currently’ Rp.130,000, then if the tax disappears we should be able to rush down to that nice shop and hand over about Rp.25,000, the price of a bottle of Bintang in Pappa Cafe on Jl. Jaksa.
That would be pleasant indeed, if injurious to the health of certain folks, but I’d happily settle for a fair deal at Rp.50,000. But what do the in-crowd have to say? Sri Mulyani seems to be on our side and
hoped that once the luxury tax was removed, the price of drinks at bars and restaurants would fall…
But her high hopes were instantly dashed when
Jimmy Gani, president director of PT Sarinah, the nation’s sole liquor importer, welcomed the tax exemption but said he could not guarantee a significant reduction in the price of a drink.
What? Of course it will. My cat can do the math! Yet neither the said feline nor I had included greed in our calculations. Jimmy went on to add
Depending on the beverage class, the tax exemption will affect the price quite a lot. However, I heard that there are plans to increase import duties, which in turn will make the tax exemption not as significant.
So does Sri Mulyani not know about these plans to increase import duty? Or does she know and just wants a headline? Or is Jimmy merely issuing a smoke-screen to avoid serious price cuts? Are there any such plans?
The Jakarta Globe gave us a break-down saying that the government currently levies the luxury goods tax of 40 to 150% on alcohol depending on its strength level. So by their reckoning, the price should still fall significantly. But here’s where the report gets odd.
Teguh Yudo Wicaksono from the Center for Strategic and International Studies in Jakarta agreed.
With the tax exemption, low-priced, standardized liquor such as beer could compete in price with non-standardized liquors, namely traditional alcoholic beverages whose quality cannot be guaranteed. This means consumers will have a safer choice in consuming liquor.
However, I do not see that there will be a drastic price cut. It will depend on each liquor, as each kind has a market niche. I also don’t see that there will be a higher number of consumers for these beverages, because liquor is for a very limited market. It’s not like people who like cola will change to beer.
But why does a guy from the CSIS get dragged into it at all? Is he a known tippler? Or is there a hidden agenda? Do political analysts have insider knowledge of alcohol markets? Is the known preference among westerners for alcohol over Coke the reason for the establishment’s determination not to pass on the benefits of these tax cuts to consumers?
Patience, Drinkers, no doubt all will be revealed.
Alcohol Taxes is brought to you by Indonesia Matters, which also features listings of Indonesia hotels, like Kuta hotels, Ubud hotels, hotels in Jakarta, and more.
