War Brews Over Peru Beer Tax Change

by Mike Godfrey, TaxNews.com, Washington

18 May 2010

A proposal to modify the application of Impuesto Selectivo al Consumo (ISC) (excise duty) on alcoholic beverages in Peru has reopened a dispute among companies in this sector.

The Union of Breweries Peruanas Backus & Johnston (UCPB&J) wants to change the tax, currently based on 27.8% ad valorem of the recommended retail price per bottle, to a fixed figure.

It is argued that the ad valorem method weighs more heavily on lower-income sectors.

After a recent submission of the proposal by the National Society of Industries (SNI) to President Alan Garcia, the finance minister, Mercedes Araoz, confirmed that his office was considering the proposal seriously.

However Cristiano Sampaio, CEO of AmBev Peru, said that the adoption of the amendment would undermine competition in the beer market and affect small brewers in particular, with a negative impact on consumer prices.

AmBev Peru stated that the current system allows free competition in setting prices, and it is more equitable to tax more highly the manufacturer who sells at the higher price.

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