Senators hear input from territory's biggest beer importers
Local general manager of South Pacific Distributors (SoPac), Mike Tolmie has made a public claim that the Lolo Administration’s proposal to change the way tax is imposed on beer will result in more taxes being paid by SoPac, and less by its competitors.
The statement, made during a Senate Budget and Appropriations Committee hearing yesterday, prompted Olivia Reid-Gillett, president of G.H.C Reid & Company to respond, saying that a correction needs to be made, as such a statement is not true.
Tolmie and Reid-Gillett were among the witnesses from the private sector who testified yesterday on three revenues measures, which include proposed amendments to several provisions of the excise tax, such as the beer tax.
Currently, excise tax on imported beer is 190% of the value, but the Administration is seeking to amend it to 35-cents per 12-fluid ounces, or fraction thereof.
It basically means 35-cents per can.
In his verbal testimony, Tolmie said “we have an issue” with the changes in the beer tax, as it will affect the company, if enacted into law. He said upon its establishment here, “we went out [and] we found the product we know is affordable to the community.”
But with these changes, Tolmie said, “we end up paying hundreds of thousands of dollars more” and “our competitors will pay hundreds and thousands of dollars less,” he claimed.
ASG officials had testified in both the Senate and House that the proposed amendment is to standardize the imposition of the “sin tax” — on items such as beer — and also to “level the playing field” for all beer importers.
In his verbal testimony, Tolmie said there is talk about a fair playing field; and a fair playing field means going out and finding a product that competes with other products in the market. “If you can’t do that, we’re sorry. It's unfair to put forward a bill where one company pays an enormous amount of money, and all your competitors pay less,” said Tolmie, who delivered his testimony in the English language.
In her closing remarks, Reid-Gillett took issue with Tolmie’s claims, saying that the statement by the other company (SoPac), needs to be corrected because it's not true.
Speaking in Samoan, she said if the excise tax on beer is approved, that doesn't mean GHC Reid will pay a lesser import tax. Furthermore, GHC Reid is not asking to “reduce our excise tax” that is paid to the government.
She claimed that some companies are using invoices that are not correct, whereby the invoices do not come directly from the manufacturer of the goods they bring in. She believes the reason for these many revenue measures targeting excise tax is that the government is losing money on tax revenues because not all of the import tax is being collected, as some companies are not honest with the invoices provided to Customs.
Furthermore, some companies are not locally owned but are owned by people off island. Therefore, according to her, much of the money earned by these companies goes off island, while GHC is locally owned by Samoans, and the money stays here.
She then pointed out that the statement by SoPac is not correct, that the proposed change to taxing import beer “saves us (GHC Reid) money while they pay more.”
In the company’s analysis and written comments - both in English and Samoan - presented to the committee, GHC Reid said it supports the new method of calculating beer tax, saying that per 12-ounce instead of invoice cost allows an “even and fair tax calculation for all beer products.”
“The sin tax must be applied equally in the same product category. The majority of beer product are already in 12-ounce packaging,” it says. “Due to the already high beer excise, vendors may try any way to avoid paying the full 190%, this can be done using dummy invoices not from the manufacturer, but partner companies or suppliers.”
The company said that invoices are hard to control or to validate; however, quantities can be verified when the containers arrive on island, and Customs already conducts physical verifications.
And by changing the calculation of tax, it aligns local tax calculation to the global community who are using volume-based calculation and not percentage of invoice. Countries using this format include the US, Australia, Fiji, New Zealand, and Samoa.
During a House committee hearing last month, some lawmakers were concerned that the new change in taxing beer, will hike the retail cost of beer that is affordable to consumers, those who are non-premier beer drinkers. (See Samoa News Aug. 24th edition for details).
GHC Reid said premier beers will remain premium, cheap beer will remain cheap, and excise tax will not remove the differentiation between the two beer categories.
“What differentiates the types of beer are the cost of the product it was purchased from, the freights and the business margins,” it says. “Cheap beer will be excised at 35-cents per 12-ounce and premium beer will also be excised at 35-cents per 12-ounce."
According to the GHC Reid, the current method of taxing imported beer “is open to manipulation”.