Carlsberg Malaysia warns new tax regime could impact beer consumption

Carlsberg Malaysia has warned that the new Sales and Service Tax (SST) could negatively impact the country’s beer consumption, impacting contraband products and lowering consumer spending.

Carlsberg Malaysia managing director Lars Lehmann

Malaysia has announced it will abolish the Goods and Services Tax (GST), similar to value added tax, and instead re-introduce the SST tax effective from 1 September.

Under the proposed SST bill, consumer goods will be taxed at 10% while the provision of services will be taxed at 6%. Previously the GST tax was lower at 6%.

“Contraband beer consumption still makes up 22% to 25% of the market, with the bulk of it occurring in Sabah and Sarawak and impacting government tax revenue. There will be an impact from the implementation of the SST, although the size of the impact would depend on how the sales tax is applied,” said Carlsberg Malaysia managing director Lars Lehmann as reported by The Star.

The executive added that the previous GST tax threshold for food and beverage outlets had an annual revenue threshold of RM 3 million (US$728,000), while the proposed threshold under the new tax regime is expected to be lowered to RM 1 million (US$243,000).

“If the sales tax is at 10% with a lower revenue threshold for distributors, there will be some impact to consumer spending,” Lehmann warned.

The company is hopeful that the Malaysian government will not further increase excise taxes in the next budget meeting,  “as any increase will lead to more influx of contraband beers and losses to government tax revenue,” he argued.

For the second quarter ending 30 June 2018, the Carlsberg group’s net profit rose 5% to RM 63.91 million (US$15.5 million), and its revenue rose slightly to RM415.45 million (US$101.1 million) during the period, thanks to higher local consumption and higher profits from its associate company in Sri Lanka, the company said.

Alcohol consumption in Malaysia is generally frowned upon, as a Muslim majority country. More than 60% of Malaysians are Muslim, and Islam is the official religion in the country, which bans alcohol consumption.

Its per capita alcohol consumption is only 1.7 litres, according to WHO, among the lowest in Asia.