Influx of cheap foreign beer costing Malaysia over US$78m in lost taxes

Influx of cheap foreign beer costing Malaysia over US$78m in lost taxes

Shaun Ho and Christina Chin, The Star/ANN, Petaling Jaya | Business | Fri, October 18 2013, 11:15 AM

There is an influx of cheap foreign beer in the Malaysian market and it may be costing the country up to 250 million ringgit (US$78 million) in lost taxes annually. Industry sources claim that beer with high alcohol content from Thailand, the Philippines, China and Europe have flooded the market and are being sold at almost half the price of locally-produced beer at coffeeshops, convenience stores, medical halls and even some established supermarkets here.The low prices and easy availability have made the brew attractive to all beer consumers, particularly the lower income group, such as labourers and migrant workers.

It is learnt that consumers are switching from locally-produced beer to compounded hard liquor because of the high price of local beer due to high excise duties.

“The supply of cheap foreign beer, with a higher-than-average alcohol volume, has increased five-fold in the past five to seven years. In the past, such beer could be found in smaller sundry shops in suburban areas, and stocked at the rear of the stores.

“But recently, the beer has made its way into 60 per cent of retail outlets, mostly small retailers such as sundry shops and liquor shops,” said one source. “They have also gained ground and are now even found in some major supermarkets and with liquor distributors.”

The sources cited reports and analysis, which estimated that the uncollected duty from cheap imported beer to be around RM250mil while the total tax evasion from all alcoholic beverages could be as high as 1 billion ringgit.

The report noted that while tax losses from beer smuggling in Malaysia are lower compared to smuggling of other liquors in terms of the amount of duty paid, the sheer volume of illicit beer makes up for its lower profit margins.

Another source pointed out that imported beer should logically cost more than locally produced beer if legally brought into the country as the import tax alone would be about 5 ringgit per litre.

Moreover, importers should pay a higher excise duty on beer with higher alcohol content.

The sources also questioned how foreign beer, despite having almost twice the alcohol content of locally-brewed beer, could be sold for as low as 4.29 ringgit per 330ml can or 7 ringgit per 550ml can (in some places, it’s only 5 ringgit) compared to premium imported beer brands that were priced from 9 ringgit per bottle.

A customs department official, who declined to be named, said beer pricing was not regulated by the department.

“Sometimes, beer is sold cheap when near its expiry date.”

Domestic Trade, Cooperatives and Consumerism Minister Hasan Malek said the ministry worked together with other agencies during raids where there are cases of counterfeit beer.

“We have just called for a joint meeting with other agencies to discuss how we can work together to solve this problem,” he said.