Malaysia: Carlsberg and Heineken disagree about impact of new ‘Sales and Service Tax’

Carlsberg and Heineken have both expressed different opinions about the impact of Malaysia’s new Sales and Service Tax (SST), which has been re-introduced on September 1st.

CarlsbergMalaysia’s managing director Lars Lehmann said, he expects that the SST will “impact consumer spending on beer negatively, especially in on trade which is exposed to double-taxation from both 10% sales tax on production level and 6% service tax at the retail level.” He also said that“ with the implementation of SST, the price gap between legal beer and contraband beer grows bigger, which increases the risk of contraband growing at the expense of legal beer. This is to the detriment of legal businesses and the government’s revenue collection. We believe only stronger enforcement by authorities can limit this negative impact.”

In fact, the SST increases the levies on beer with Malaysia’s excise duty for beer being currently already the third-highest in the world at RM175 (US$42.27) per liter of alcohol by volume (ABV) 100%

Heineken Malaysia’s finance director Szilard Voros, however, expressed his company’s belief that “consumer sentiment will continue to be on a high level. Under the SST we don’t expect a big impact.” He also pointed out that the beer price after the implementation of SST will be lower than with the Goods- and Services Tax (GST), which was in power since April 1, 2015.

During the elections in Malaysia in May, the newly elected political Alliance of Hope Pakatan Harapan promised to scrap the unpopular 6% GST, which had to be paid directly by consumers. Instead, effective September 1, 2018, the government brought back the 10% SST, which is imposed on manufacturers and importers and burdens consumers only indirectly. However, producers were forced to raise prices to recover the tax.

Carlsberg increased prices of their products including Carlsberg, Asahi Super Dry and Kronenbourg 1664 by 5.5% effective Sept 1. Heineken followed suit with its own price increase on Sept 17.

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