Producers demand review of liquor tax after deaths

The Jakarta Post ,  Jakarta   |  Fri, 10/16/2009 2:35 PM  |  Headlines

The rationale behind the regulatory treatment of alcoholic beverages has increasingly become irrelevant as clashes with market forces have created various excesses, an industry association said.

The Alcoholic Beverages Pro-ducers Group of Indonesia (GMMI) said high taxation on alcoholic beverages, coupled with its weak enforcement, exacerbated illegal imports and even caused deaths among consumers drinking dangerous liquor produced by largely unregulated home industries.

Citing studies carried out by the government and the Center for Strategic and International Studies (CSIS), the GMMI said 60 percent of alcoholic beverages traded in the Indonesian market every year were either illegally imported or produced.

The studies found that the consumption of deadly liquor claimed more than 60 lives last year, with hundreds hospitalized in cities such as Jambi, Manado, Kediri, Jayapura, Indramayu and Medan.

The incidents attracted foreign attention, with the governments of Australia, the United States and the United Kingdom issuing a warning to their citizens traveling to Indonesia to be wary of consuming local alcoholic beverages of any sort in the country.

The government argues that, regardless of being a secular country, as a predominantly Muslim nation, Indonesia should limit the distribution of alcoholic beverages through implementing high taxes and awarding sole import rights to the state-owned retailer, PT Sarinah.

In 2008, PT Sarinah reported Rp 62 billion (US$5.8 million) in collected tax revenue from liquor.

The government categorizes alcoholic beverages as luxury goods, thus charging a minimum of 40 percent and a maximum of 150 percent in tax, depending on the price of the product and the alcohol content.

Such treatment is no longer in line with international practices, said GMMI spokesperson Ipung Nimpuno in Jakarta on Thursday.

Indonesia, he said, is the only country in Asia not implementing the volumetric taxation system, which is based on the product's volume and also alcohol content. Malaysia, also a predominantly Muslim country, has adopted volumetric taxation, Ipung said.

Speaking on behalf of beer producers also, Ipung said domestic players produced up to two million hectoliters of beer annually, with the average contribution to the government through taxes and duties reaching Rp 4 trillion.

Ipung claimed that a volumetric taxation system, albeit reducing the tax rates, would boost sales volume and generate an additional Rp 1.7 trillion in revenue to the government annually.

"The government's lowering of the tax will certainly disrupt the black market and discourage people from consuming illegal or smuggled liquor," the report concluded. (naf)

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