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Excise duty hits Carlsberg Malawi sales volumes

Carlsberg Malawi Limited has said the 10 percent excise tax levied on its non-alcoholic beverages has affected the company’s profitability, resulting in a 17 percent reduction in volumes since May this year.

Carlsberg Malawi, a subsidiary of dual listed Press Corporation Limited (PCL), manufactures soft drinks, orange squash and bottled water through Southern Bottlers (Sobo), and Premier Brandy and Powers No 1 through Malawi Distilleries Limited.

Brown (L) with Chikaonda (C) and Ndau
Brown (L) with Chikaonda (C) and Ndau

The brewer’s managing director Gavin Brown told the Budget and Finance Committee of Parliament on Thursday in Lilongwe that the introduction of duty on their non-alcoholic beverages has greatly contributed to the company’s reduction in the revenue remitted to the Malawi Government and its profit.

In 2014, the company remitted K20 billion ($38.2 million) to government through Malawi Revenue Authority (MRA), a jump from the previous year’s K19 billion ($36.3 million).

The company said before excise duty on soft drinks was suspended in May 2013 for 18 months, its forecast revenue was K10.4 billion, but when the price was held, the company managed to raise K19 billion.

“The excise tax has been reintroduced and our volumes are suffering. We are declining by 17 percent and that has a direct impact on the amount of revenue that Carlsberg Malawi will generate for government,” said Brown, who was accompanied by PCL group chief executive officer (CEO) Matthews Chikaonda and company secretary Bernard Ndau.

He said being producers of fast moving consumer goods, Carlsberg Malawi remits most of the taxes to government through value added tax (VAT) because as volumes rise, revenues would also rise through VAT.

“Excise tax is meant to control consumption by raising taxes and it is applied to products such as alcohol and cigarettes. But the problem comes in when excise tax is applied to non-alcoholic beverages. Any slight movement on prices has an effect on taxes which the company can collect.

“When there is reduced volume in soft drinks, the total revenue stream to government is also reduced,” explained Brown to the committee members.

He said when excise tax was reintroduced last year; the company experienced a 24 percent decrease in its volumes of non-alcoholic beverages which was also attributed to massive devaluation of the currency in 2012 coupled with the increase in the prices of the soft drinks.

Brown requested the committee to re-evaluate excise tax on non-alcoholic beverages.

Apart from the introduction of excise tax on its non-alcoholic products, Brown also said the discovery of financial irregularities in the company this year has affected its profitability apart from high cost of imported raw materials and increasing cost of production.

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