Ridiculous Taxes on Alcohol

           Alcoholic beverages have existed in all cultures through most of their recorded history. It is believed to bring negative consequences when it comes to drinking  but we are to consider their potential for positive, culturally adaptive mechanisms. For example such as in Malaysia, it is a Chinese tradition for the host of a celebration( weddings, house warming & etc.) to provide guests with alcoholic beverages where they sit together to feast and drink, this is where the infamous term "yam seng"(Cantonese word for drink) came to be very popular among all races in Malaysia. Drinking is a way for people to gather together and also acts as entertainment. Western culture of drinking in bars after a long day of work has essentially influenced eastern culture as well where more and more Malaysians are seen ordering pints of beer in pubs and bars all around KL. Ever since, alcoholic beverages have been in increasing demand.

            Based on an article i have read online from The Edge Malaysia, "The government (of Malaysia) in the past 10 years has moved taxes (on alcoholic beverages) from one of the lowest in the world to one of the highest,"said Guinness Anchor Bhd's(GAB) managing director Charles Ireland. Fellow Malaysians welcomed the tax increase with distaste because of the rise in prices of alcoholic beverages as well. Carlsberg Brewery Malaysia Bhd managing director Soren Ravn stated that breweries in Malaysia agreed to increase beer and stout prices by an average of 3.6% to pass on the higher input costs to consumers. With such increase, it has added more weight to the financial burden of those with low and middle income. Consumers unsatisfied with the taxing and price increase stated that they already pay enormous amounts of duties and taxes on every glass of alcoholic beverages consumed and feel it's unjustified and very expensive compared to any other country, also stating that Malaysia has the second highest duty on beers in the world just after Norway which has higher income of 8 to 9 times compared to the income of Malaysia.

           Although Malaysians continue to present their distaste towards the price increase of alcoholic beverages, yet the demand for it does not decrease but instead increases still. According to the World Health Organization(WHO), Malaysia is the world's 10th largest consumer of alcohol despite being a small country consisting of a small population; with beer consumption up to 11 litres per capita. This shows that alcoholic beverages are non-elastic goods. That is why breweries were bold enough to pass on taxes to the consumers without worrying about the decrease in demand and at the same time increasing revenues for the breweries and the government while consumers suffer the cost.

While prices continue increasing but not the salaries of consumers, it is possible that they might try to find substitutes to alcoholic beverages or even spend less on something else to cover for their alcohol expenses. Consumers might spend less on healthy food , health supplements, or even medication. This in turn will increase health problems in the country which Malaysia is already facing. To some extent, some Malaysians drink cheap and dangerous backyard brews and compounded hard liquors(CHL) because they have been priced-out of the market for being safe alcohol. Most local producers don’t practice safety standards or quality checks which have cause consumers to face various liver-related illnesses. Because of the taxes and prices increasing all the time, a black market is introduced containing more and more smuggled alcoholic products and beverages which are sold a lot lower than the actual market price. Counterfeit liquor is also among the problems occurring due to the price increase of alcohol where these illegal producers are making millions .According to Stars, fake liquor is pouring into the country with naïve consumers drinking adulterated spirits and assuming that they had a good bargain because it was sold way below the market prices. The increase of alcohol prices is also one of the reason crime rates are getting worst with bar tenders serving customers with the so-called ‘genuine ‘ whiskeys and beers and also circulating in Chinese medicinal halls and mini markets. Ireland believes that increase of taxes does not discourage people to consume less , but encourages them to change the form of alcohol they consume, consumers will seek for contraband or smuggled beer or shift to hard liquor with same alcohol content for a lower price per unit. Ireland also quotes “it will encourage the black economy of smuggling, and government revenue would go down rather than go up. This would have a negative impact on the economy overall when you take into account the lower excise collections, lower employment, lower number of tourist arrivals.” Malaysia is said to rank among the top five countries affected by the problem of counterfeit liquor . Evident that demand for such counterfeit supply is also very high. In some cases, people use drugs as a substitute to alcohol(ecstasy,aramin) because these drugs provide intoxication at a very much better value-for-money.

Tourism which plays a big role in Malaysia’s economy is also affected by alcohol prices where tourists avoid coming to Malaysia because of the incredibly high prices of alcohol. For example in Langkawi, taxes are exempted for all alcoholic beverages, it has helped boost its reputation as a tourist hot-spot where people travel miles just to enjoy a holiday there with lots of affordable liquor and sandy beaches. The government is actually facing a tradeoff and are facing more loss than gain.The government thinks that raising alcohol taxes will limit people from drinking as well as improving health but in reality it’s actually doing more harm than preventing it. If that was really the government’s intention then they should cease to increase alcohol taxes, instead they should try educating the people with more campaigns against abusive drinking. They shouldn’t increase prices resulting more harm such as increasing smuggling, fake liquor production which is unhealthy, making the people suffer financially and putting the country’s tourism at risk.


                                                                                                         
                                                                                                          By: Jonathan Chong