Brewers in Brazil are facing a 27% rise in taxes

Brewers in Brazil are facing a 27% rise in taxes

Brewers in Brazil have hit out at a 27% hike in beer tax, claiming it will force companies to review their investment plans for the year. 

The federal government introduced a 27% increase for beer and 10% rise for soft drinks last week. The changes are due to take effect in October and comes on top of a 17% rise in beer tax last year.

Sandro Serpa, secretary of taxation and internal revenue litigation estimated it would only force drink prices up by 2.85%. 

But a coalition of drinks associations challenged this figure. "The estimated increase of 2.85%...does not take into account the impact of the measure on the calculation of VAT, retailers' margins and other variables that make up the price of products,” said beer industry association, CervBrasil, the Brazilian Association of Beverages (ABRABE) and the National Union of Brewing Industry (Sindicerv), in a joint statement.

It added: “Taking into account all these variables, the increase could reach 10% to the final consumer.” 

CervBrasil, established last month and including AmBev, Schincariol, Petropolis and Heineken among its members, claims the brewery sector in Brazil is responsible for 1.7% share of GDP, generating 1.7 million jobs.

The association added separately: “The readjustment of federal taxes will lead directly to pass in the prices of beer and soft drinks, which should further erode the sales volume, forcing companies to review their planned investments.”

Analyst Mark Swartzberg, of Stifel Nicolaus, said in a note that brewers were "likely to implement price increases next month, i.e., earlier than the usual timing of 4Q, in response to the increase".