Soft Drinks Producers Protest against Excise
21 February, 2013
Soft Drinks Producers Protest against Excise
Non-alcohol drinks excise labeling will not enter into effect on March 1st, 2013 as a result of protestation campaign launched by non-alcohol drinks producers recently. Producers find the excise labeling unfair and appeal Georgian government to cancel the idea.
Excise labeling of soft drinks that were scheduled to become effective this year in order to improve tax administration and combat falsification, has been delayed twice already under the pressure of private sector. Decision of the excise labeling of non-alcohol drinks
was made by the former power that be in April of 2012 and was scheduled to become effective starting January 1, 2013. Ex-administration even contracted a Swiss-based SICPA Security Solutions Georgia LLC as an operator company to administer excise labeling of non-alcohol drinks through digital procedures. For its service the operator company charges companies by the equivalent of EUR 5.5 in national currency [around GEL 12] per one thousand bottles of soft drinks and by EUR 4.63 [around GEL 10] per one thousand bottles of mineral and still water that producers find rather expensive.
But the money levied by the digital labeling will be channeled not to the state budget as other stamp-based excise is; it will go to the operator company SICPA Security Solutions Georgia LLC, whose exact contracting terms are not available as yet. Nodar Chichinadze, Chairperson of the Association of Young Financiers and Businessmen of Georgia, calculated that based on the said charge rates, since Georgia produces about 500 million liter soft drinks, the operator company will take GEL 5-6 million for its service, while it will have minimal administration expenses.
Soft drinks producers assure that the only party that will be flushed after adopting digital labeling is the operator company. Georgian producers, consumers and state budget will be only at loss: the point is that the labeling-related charge that burdens business by unforeseen expenses, will jack consumer prices up on soft drinks on both local and export markets. Ultimately, sales will shrink, undermining the profit figure of business and tax-based revenues in the state budget.
Therefore, the private sector asks the government to give up the excise labeling initiative and undertake other less expensive and more effective remedies of good registration and control. On top of all, the initiative is not in line with the best world practice. Excise by its concept taxes goods hazardous for health or luxury goods while soft drinks and water don’t fit into that description.
Ministry of Finances of Georgia (MOF) delayed the execution of the excise labeling from January of this year to March 1, but as the date came nearer, the companies became more anxious and number of major soft drink producers set up an Association of Non-Alcohol Drink Producers on February 18, 2013 to ensure due resistance to the upcoming labeling initiative and also handle other problems in the sector through joint efforts. Coca-Cola Bottlers Georgia, IDS Borjomi Georgia, Iberia Refreshments, Aqua Geo and Healthy Water are members of the association. However, consultations are conducted with other companies as well to enlist them in the said business amalgamation. They sent two let ters to the Minister of Finances in December, 2012 and February, 2013 but no answer ensued and the association decided to trumpet its affliction through an open letter in media. They stressed that falsification is not a problem in Georgia to call for the introduction of expensive controlling mechanism as labeling.
“None of the developed countries practice digital labeling of soft drinks. There are rare examples in Latin American and African countries. Other states implement registration and control of goods through different, less expensive mechanisms not at the expense of business. The state should implement control on produced product but business should not pay for the state control, especially to a foreign company. Goods registration falls in the competence of the state not the business,” Association’s statemnt says.
Protesting producers made their voice heard by Bidzina Ivanishvili, Prime Minister of Georgia, during his meeting with businessmen on February 19, 2013; he promised to postpone the labeling again. After meeting with Ivanishvili, the businessmen became hopeful that digital labeling would be canceled.
However, MOF informs that they are still working on the issue and are trying to find a solution that will rid the business of problems and ensure goods’ registration properly.
According to Irakli Lekvinadze, founder of Choose Georgian Company, focused on sales management of Georgian soft drinks, the best world practice to fight falsification is either through court or self-regulation like stamping special brand identification marks on the product.
On the other hand, if MOF suspects that certain company produces unregistered products, it can simply inspect the company.
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