Liquor excise increase "big stupid mistake”
The Government's decision to increase excise on locally-made liquor by up to 100 percent, and then reduce it again 13 months later, was a “big stupid mistake", the Owner of one of Samoa's largest distilleries says.
John Rankin, Owner of Niu Vodka, said the Government lost revenue due to their decision to impose high liquor taxes because higher prices led to fewer sales and therefore less tax revenue.
“The Government lost revenue because they increased taxes, thinking it would automatically generate more money, but they were wrong as it was the other way around,” he said.
In April last year, Parliament passed a law increasing the tax on liquor to $38.60 per litre. (The excise applied to all liquors containing alcohol by volume of between 40 and 57 per cent.)
However, in June this year, the same law was amended, reducing the tax to $21.23 per litre.
Under those changes, the excise is then set to increase once more, to $23.25 next year and $25.68 the following year.
“We used to pay $30,000 per month (and that equates to $360,000 per annum) to the Revenue [Ministry] and our sales dropped significantly and we only paid $1,000 plus on taxes,” said Mr. Rankin.
“We had to increase the price to make a profit and in the end, we lost sales and the Government lost revenue.
“It’s puzzling as to why the Government moved to increase taxes without considering the ramifications on the businesses and also on them."
The Minister for Revenue, Tialavea Tionisio Hunt, said the tax increase was designed to curb the increase of alcohol-related violence.
“And we have found out that it wasn’t just liquor that’s a contributing factor to violence in the country, beer also is a huge factor," he said.
“The Ministry also considered the impact it had on the businesses. I was told three businesses have closed down as a result [of] loss of employment opportunities and loss of revenue to Government.”
The Minister did not name the businesses he claims were forced to close their doors.
Asked why Revenue did not consider those ramifications before approving the law, Tialavea said at the time such matters were not relevant.
“We had to do something about the increasing number of crimes where alcohol was a factor," he said.
“We did what had to do to."
Tialavea pointed out the Government’s intention is not to close down businesses, but to address the number of violent incidents in which alcohol is a contributing factor.
Mr Rankin told the Samoa Observer that, although the Government has moved to reduce the taxes, businesses are struggling to continue.
“Although it has been reduced it’s going to take a while before we can pick up sale again," he said.
He said the law bans bottles under 500 ML (millilitres), which is another loss to local product ranges.
“We can sell those mini liquor bottles to the hotels and in turn [it makes] money for us and taxes for the Government," he said.
Mr Rankin then urged the Government to turn to their overseas counterparts for evidence that increased taxes harm businesses.
“And in turn [that] not only hurts the business but also the Government," he said.
The businessman hopes the Government will consider the impact of their decisions on the country before they make "hasty decisions only to renounce it in the end.”