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Massive Redundancies In The Offing… Beer Importers Write NRA Boss

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Massive Redundancies In The Offing… Beer Importers Write NRA Boss

Importers of alcoholic beverages have, in a letter dated 15th June 2016, informed the Commissioner General of NRA (National Revenue Authority), Haja Isatu Kallah-Kamara that, the speedy and irrational implementation of Section 22 of the Finance Act 2016 will lead to massive job losses in the distribution and supply chain of their products. They also noted that, smuggling of the products will intensify along Sierra Leone’s porous crossing border points with Liberia and Guinea.

The importers further noted that, the increase in excise duty on alcoholic beverages will eventually lead to a huge loss of revenue for the Authority.

Sierra Leone Brewery Limited, which is the sole importers of Heineken from Holland, will also be affected by this new tax regime. The company has reported huge losses for the Financial Years ending 2014 and 2015.

In 2014, Sierra Leone Brewery Limited reported a loss of almost Le34 Billion. The following year, the company reported a loss of Le50 Billion. The retained loss for the same year (2015) is Le111, 859,503 (One hundred and eleven Billion, eight hundred and fifty nine million five hundred and three thousand Leones).

Beer Importers Write NRA Boss

Date: 15th June, 2016

The Commissioner General

National Revenue Authority

Bathurst Street

Freetown

Dear Madam,

Finance Act of 2016-Excise Duty on Imported Alcoholic Beverages

We refer to our meeting with you on 14th June 2016 and hereby submit our concerns if Excise Duty as mentioned in the Finance Act of 2016 is implemented.

  1. Selling Price: Selling price of each carton of beer shall immediately increase between Le 250,000-3000,000 (or 200%) to the consumer depending on the size of cans in each carton. Selling price of wine shall increase between Lee32,000 to Le35,000 per bottle. Details of current and new prices, if new excise is implemented attached for your reference.
  2. Undeclared cross border activity: As additional excise will be US$ 48 per carton (on 500 ml cans which are the most saleable size) informal sector will start smuggling from porous border crossing points. This shall adversely affect NRA revenues.
  3. Loss of Revenue: As very few consumers can afford to buy at new selling price; importers shall reduce importing all imported alcoholic beverages which is one of the main sources of revenue for NRA. Currently we pay 98% of CIF value of NRA on all imported alcoholic beverages. We estimate between le150,000,000,000 to Le 175,000,000,000 is paid each year by importers of alcoholic beverages.
  4. Employment: It is anticipated that around 65,000 individuals are employed by both formal and informal sector in the selling of imported alcoholic beverages. Such an increase may well fuel further unemployment as very few can afford to buy at such high prices.
  5. Tourism: As Sierra Leone is on the path of recovery after the deadly Ebola outbreak and promoting tourism, his act will be a major deterrent to the promotion of tourism as very few tourists will buy a can of beer for US$ 6 of more and a bottle of wine for US$ 20 or more.
  6. Unwarranted business practice: Large local brewers will have an apparent unfair competitive advantage in the market despite their production and logistics output constraints.

Madam Commissioner General, you will agree that with the current economic situation, where the majority of people are struggling to make a living due to sharp increases in the cost of living due to various factors, this very high increase shall add to the suffering, increase unemployment and result in huge loss of revenue to the Government, to mention but a few.

In light of the above, we would request you to use your good offices and take up this matter with the appropriate authorities, at the earliest possible time and ensure that this new unfair excise duty on imported alcoholic beverages is revisited.

We thank you and assure you of our best cooperation at all times.

Signed

Alcoholic Beverage Importers

Beer Importers Write Finance Minister

Date 30th June, 2016

The Hon. Minister

Momodu Kargbo

Ministry of Finance and Economic Development

George Street

Freetown

Dear Honorable Minister,

Re: Adverse effects on importation of Alcoholic Beverages Pursuant to the provisions of Section 22 of the Finance Act 2016

Having written prior to the National Revenue Authority (Copy attached for ease of reference), it is with a deep sense of loyalty and concern that the above referenced subject matter is being brought to the attention of Your High Office in the hope that the necessary remedial action will be taken to support the continuation of international trade.

Sir, as a result of the monopolistic provisions of Section 22 of the said Act, Sierra Leone’s free market economy will be isolated and deprived of a choice of imported alcoholic beverages which will eventually stop because of the massive additional financial excise burden which will increase the landed costs exorbitantly. A carton of beer/stout/cider might increase from Le 150,000 to over Le460,000.

Honorable Minister Sir, this is not financially or commercially viable as the Market Disposable Income and Purchasing Power of Pay Packages cannot absorb such an increase. In short, these products will be out of the reach of most consumers and will not sell.

In brief

  • Current effective rate of duty including excise on imported alcoholic beverages is 98% of CIF Value.
  • Section 22 will increase the effective rate of duty around Le300,000 per carton
  • Increase smuggling due to comparative high excise cost.
  • There will be involuntary labour redundancies and layoffs.
  • Importers cannot justify the product sales risk exposure from such exorbitant and monopolistic maneuvers not to mention the effects on business cash flows to meet tax obligations.
  • Significant reduction in return on investment from such imports.
  • Erosion of investor confidence in doing business and future trade.

Sir, in light of the above, we hereby request a meeting with you at your earliest convience so that we can discuss the adverse implications of the provision of Section 22 of the Finance Act and the way forward.

Thanking you

Yours faithfully,

Alcoholic Beverage Importers

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