The tax will affect beer more than soda

The tax will affect beer more than soda

The trade body for Brazil's biggest brewers has said it is “surprised” by the government's decision to change the country's tax code on beverage sales.

The change, which will increase the base tax on beer and soda brands from 1 June, was announced by Brazil's federal tax office last week. It follows a separate tax increase on beer and soda last month.

CervBrasil, which represents AmBev, Brasil Kirin, Heineken and Grupo Petrópolis, said: “The surprise is due to the fact that ... the government increased taxes on beer twice in less than a month, with no discussion talking place between the government and industries.”

According to the trade body, taxes on cold beverages have increased more than 30% since April last year, or four times above inflation.

Analysts said the latest change, ahead of next month's World Cup, had been anticipated, but was a few months earlier than expected. JP Morgan said it was cutting its estimates for beer and CSD volumes in Brazil by 3-4% for the full-year, as a result of the increase. 

“These volume reductions may prove conservative, given that elasticity in the World Cup period will likely be smaller, and that AmBev will likely use its wide brand and SKU portfolio to mitigate the increased price perception,” said analyst Andrea Teixeira. 

Teixeira told just-drinks that the tax change is expected to hit brewers harder than soft drinks makers.

In Brazil, federal taxes are calculated using a reference table indicating the price for each brand. A “multiplier” is then applied to the reference price to show the overall federal tax.

Last month, the government increased the multiplier. However in the latest change, the reference prices have been increased. The government says it was forced to increase this element after beer prices were found to have risen by 23% and soda prices by 19% since 2012. 

The tax increases are to reflect the level of prices charged by companies, the federal tax office said.

Last week, Coca-Cola FEMSA said the tax change will force it to raise prices in the country by up to 2%.

For a list (in Portuguese) of the new reference prices for each beverage, click here.

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