NEWS | Wednesday, 05 November 2008

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Martini importers ‘shaken but not stirred’ by budget

Raphael Vassallo
It has been touted as a “Green Budget”, but the new fiscal measures introduced by Tonio Fenech on Monday also have their fair share of moral overtones.
Citing his government’s determination to curb social vices such as cigarettes and alcohol – but not, curiously, gambling – the Finance Minister on Monday announced a revision of the excise duty on various alcoholic beverages.
“We are taking these measures in the best interest of our society,” Fenech told the House. “Our intentions remain to cut down on excessive consumption of alcohol.”
In practice, though, it appears that the measures will cut down primarily on excessive consumption only of imported alcohol... and even then, not all sectors of the market are to be affected equally.
The excise duty on spirits, for instance, has actually gone down from 23c to 17. The idea, Fenech explained, was to bring local prices in line with those of other European countries, thereby reducing or removing the demand for contraband alcohol: a factor which undermines competition and threatens jobs.
In a joint statement issued yesterday, the Chamber of Commerce and Federation of Industry cautiously welcomed the revision of excise duty on spirits.
“Government’s decision to reduce excise duties on spirits was perceived as a step in the right direction but it would have been preferable for the gap with nearby countries to be closed further,” the statement began.
“After all, this measure was not intended to encourage alcohol consumption but to combat illicit trading from abroad. At the same time, it is expected that such a measure be complemented by stronger market surveillance to eliminate abuse across the board, particularly with regards to food and beverage products.”
But while the measure appears popular among retailers, parents of minors may be less impressed by continued availability of cheap, strong alcohol in places like Paceville.
It is for this reason that Budget 2009 also raised the legal age limit for alcohol consumption from 16 to 17, and promised “increased enforcement” of such measures in popular entertainment hotspots.
In part, however, this drive to address excessive alcohol consumption among the young has also resulted in a situation whereby specific segments of the market are harder hit than others. These include “alcopops” – light, popular beverages combining the sweetness of a soft-drink with the alcoholic content of a glass of wine – but also “intermediates” such as Vermouth, Port and Sherry: fortified wines which enjoy considerably more popularity among older consumers.
In the case of classic Vermouths such as Martini – the drink made famous by James Bond, and advertised the world over by George Clooney – the excise duty has shot up by over 220%.
Dennis Zammit Cutajar, of local agent P. Z. Cutajar Ltd said yesterday that while the measures on spirits were widely anticipated, those affecting intermediate products were both unexpected and severe.
“There has been talk about lowering excise on spirits in order to counter illicit parallel trading,” he said, “But the increase in intermediate products was never mentioned, and took us completely by surprise.”
By comparison, the excise duty on ethyl alcohol – the pure, 100% alcohol used in the making of liqueurs such as Limoncello, and also for industrial purposes – went down by practically half, from €0.23c to €0.14. Another measure aimed at combating illegal importation; but one which also had observers wondering whether Fenech may have had a couple of Limoncellos too many, before deciding on his excise duty revisions.

rvassallo@mediatoday.com.mt

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