The AEB brought together experts and businesses to discuss the state initiative on the introduction of excise taxes on non-alcoholic tonics at the round table

31.08.2015

Round table "Introduction of excise taxes on non-alcoholic tonics: planned change in the law" was held by the Association of European Business in the conference hall of the hotel "Minsk" August 27, 2015. During the event the experts in business and healthcare discussed the feasibility of non-alcoholic beverage market regulation.

Earlier, on the site of the Ministry of Finance a draft of the law "On Amendments to the Tax Code of the Republic of Belarus" was published, which contained rules relating to the extension of excise goods: in particular, it was proposed to impose an excise tax on alcoholic energy drinks. This innovation was associated with so-called "negative effect" of the "energy drinks" use.

According to the Association of European Business experts, the market of non-alcoholic beverages is small in Belarus. However, the introduction of excise taxes can reduce it even by 11%. The budget in general is also unlikely will benefit from the introduction of the excise tax: the market contraction will lead to budget losses in terms of VAT and income tax. According to the calculations of the AEB, in the first half of 2016 the estimated cost of 1 liter of non-alcoholic drink taking into account the excise taxes could reach Br44900, of which Br7 thousand - is the excise tax (15.6%), Br 500 - chek (identification) mark (1.1%), Br8000 - VAT (17.8%):

- Consumers should be aware that 16.7% of the beverage cans cost is a fee that “protects” a consumer from soft drinks. There is no such a practice in the EU or in the EAEU - says Marina Barouka, Deputy Chairman of the Association of European Businesses.

Tonic energy drink manufactures are concerned about the introduction of the excise tax. When the market is significantly reduced, the production of such drinks can become uninteresting for Belarusian producers.

- Recognizing the format that we produce, the excise tax in the cost of the drink will be Br2635. This is more than the prime cost of the drink. Of course, the increase in the selling price will affect sales, but this product is not the product of prime necessity, - says Valentina Shepeleva, Deputy Director of finance and economy of CJSC «Minsk Soft Drink Factory».

- Producer reputation is very important for us as for a market participant. No one wants to use a product that have been associated with some negative effects in terms of impact on the health. And the recipe for the products are agreed with the Ministry of Health. And the Ministry has the right not to allow the release of a product, if it is dangerous to the health, - added Olga Vasiltsova, chief technologist of CJSC «Minsk Soft Drink Factory».

Furthermore, it is worth thinking should about the image component as about the investment attractiveness of the country. It was said at the round table by Andrew Roshupkin, the First Deputy General Director of the Unitary Enterprise Coca-Cola Beverages Belorussiya:

- No matter how much it would be said that regulatory impact is directed to the care for the health of the consumers, still overregulation without reason is, at least, unprofessional.

We see that the government is taking a lot of efforts to improve the investment climate, investment laws in order to attract investors, but the business is primarily interested in stability. To my mind, stability includes stable legislation and tax policy. If the excise tax on tonic beverages will be imposed, then any potential investor will assess the situation in Belarus as a high-risky business and hardly predictable. Because of these measures the investment image of the country will be destroyed.

Dmitry Barouka, President of "Ketendzhi" international law firm, told about regulation of energy drinks turnover in the European Union and its individual EU member states:

- Energy drinks are presented on the EU market over 20 years, and they are safely used and enjoyed by consumers around the world. Security of the key ingredients has been evaluated and confirmed by the European risk assessment institutions. Safety of the key ingredients has been evaluated and confirmed by the European Risk Assessment Institution.

There is no single agreed legislation which defines the procedure for handling energy drinks or regulates them specifically as a special class of products in the EU.

Generally, energy drinks are subject to the general legal regulation of the food products turnover, including the prohibition against placing unsafe food on the European market, the specific requirements for labeling of the caffeine content and information about a product as well as a manufacturer. Thus, manufacturers are required to indicate high levels of caffeine and its exact content in a product, in cases when it is larger than 150 mg / l. Since 13 December, 2014 marking for such products must contain the words "Not recommended for children, pregnant or nursing women". But at the same, the possibilities to specify useful properties of energy drinks are limited. Since December 2012 it is allowed to indicate the useful properties of the products, if they are scientifically justified and approved by the European Commission. However, caffeine or amino acids useful are not presented in such list of ingredients, therefore an indication on the useful properties of energy drinks is prohibited.

- On the national level, some EU Member States have tried to ban directly or de facto advertising of energy drinks on their respective territories or required a prior approval of main ingredients in accordance with public health and safety standards. However, a number of European court decisions in which the Commission has changed such solutions and special regimes, established that while the Member States enjoy "the freedom of action" in decisions about the level of public health protection, in the conditions of scientific uncertainty (in particular the risks associated with the consumption of energy drinks), restrictions on the marketing and promotion of energy drinks must be supported by credible and evident scientific proofs. In the absence of such, these prohibitions and restrictions are unreasonable trade barriers, - noted Dmitry Barouka.

For example, in the case of the European Commission against Italy, the Court declared the law of Italy, prohibiting the advertising and sale of energy drinks in Italy in which the caffeine content was more than 125 mg / l, in the case of the scientific proofs absence which would confirm the risk to public health above this level, as an illegal measure that is an equivalent to a quantitative restriction on imports.

As it was noted above, the State motivates the introduction of the excise taxes on soft drinks to be the care of people's health. The Association of European Business received an official response from the Ministry of Taxes and Duties that states: "Excise taxation will fulfil a regulatory function, aimed at reducing the availability and consumption of non-alcoholic energy drinks that has an ambiguous impact on human health, and in certain cases (for example, while the use of alcohol) is dangerous."

During the roundtable Sergei Osipchik, Deputy Director of the medical unit Government Institution "Republican Scientific and Practical Centre of Mental Health" maintained the following attitude:

- Group of young consumers is especially important within the framework of the possible harm or health risks that may result from the uncontrolled consumption of energy drinks. Here are the health risks of caffeine: overdose causes palpitations, hypertension, nausea, vomiting, etc. Caffeine consumption is very dangerous for pregnant women ... I think the Government is completely rational in the decision on excise taxes introduction on products that potentially have risks of their use or uncontrolled consumption.

He also believes that the main risk is in the manner of building the tonic and non-alcoholic beverages’ marketing and promotion:

- There is danger of formation a connection between fun, glamour and night-life with energy in the public consciousness. Stimulation is not so bad, but the caffeine stimulates the body and central nervous system due to internal reserves. If a person is tired, he has exhausted internal reserves and consumes caffeinated products, it would further drive himself into crisis. Moreover, the risk of caffeine-containing products consumption tend to lead to the following consumption of other psychoactive substances, particularly alcohol: in the club a young man after a tonic always continues with alcohol.

At the same time Alexander Patalakha, Ph.D. in Chemistry, a member of the Union of manufacturers of soft drinks and mineral waters (Russia), sees no danger to health from taking tonic soft drinks:

- The hypertrophied attention to this segment of non-alcoholic beverages, in my opinion, is not adequate. Caffeine enters the body of a Belarusian in hundreds of times more through tea and coffee than from energy drinks. And these products do not cause concern, convulsions, and other effects.

According to Alexander Patalakha, 400 mg of caffeine per day from all sources with regular consumption - is safe for healthy people. It is approximately 5 cans of energy tonic, or 3-4 cups of coffee or 5-6 cups of tea. For pregnant and nursing - 200 mg per day, and for children - 3 mg per kilogram of body weight.

- Of course, caffeine at high levels may result in negative effects. But this dose starts from 1000 mg per day. To reach such a dose, you need to eat 2 kg of chocolate, or drink 3-4 liters of non-alcoholic tonic drink. It is extremely difficult even technically, - the expert of Russia said.

Maxim Grishin, Deputy Chief Doctor on medical work of "Epicenter" (Russia), announced the results of a study on the possible negative effects on the behavior of animals during long-term consumption of soft tonic (energy) drink. The study found that long-term use (within 1 month) of non-alcoholic tonic (energy) drink as a "free choice" between the drink and water does not lead to the formation of affection to drink and physical dependence, and alcohol does not contribute to the affection to alcohol. At the same time, use of non-alcoholic tonic (energy) drink in this mode is accompanied by an increase in motor activity without disrupting circadian rhythms, also without decrease in the level of anxiety and fear, that allow to speak about the presence of anxiolytic action in beverages.

Before you introduce restrictive measures against tonic energy drink, the state did not conduct any research nor for the consumption of tonic soft drinks in the country, nor in their effect on human health. At the same time Andrei Roshupkin told that the company "Satio" conducted a study on the consumption of soft drinks tonic. Sampling across the country amounted to 1,000 people. As a result, it was found that only 19% of adults (from 18 to 44 years) and 21.9% of adolescents (from 15 to 17 years old) used the energy drinks during the last 12 months.

- In other words, the majority of the population, including 78.1% of teens does not know the taste of energy drinks at all. And for those who use, there are only 1.1 liters per year, - the First Deputy General Director of the Unitary Enterprise Coca-Cola Beverages Belorussiya announced the results.

The proposal to introduce excise taxes - is not the first attempt of the state to limit the turnover of tonic energy drink. In the end of 2014 at a meeting of the Interagency Council on warning and prevention of alcoholism, drug addiction and tobacco consumption the necessity to introduce certain restrictions on advertising was discussed. During the event it was considered the possibility to forbid the sale of energy drinks to anyone under 18 years as well as the sale in stores of less than 50 square meters, but later the subject was removed from the agenda of government agencies. As Yauhen Mardasevich, the Head of the AEB GR Department, noted, such baseless attempts to limit the turnover of any goods is very dangerous:

- I see a bad precedent. If the Government wants to impose excise duties on tonic non-alcoholic beverages with no justification for this, it turns out that in a half of a year the Ministry of Health may initiate the excise duties on salt, animal fats, sugar, pork - after all, these products are also harmful to health in the case of heir excessive consumption.

UPD. Next day, after the round table of August 28, 2015, it became known that the Ministry of Finance refused to impose the excise duty on tonic soft drinks in 2016. As it was explained to the TUT.by in the Ministry, this initiative has been proposed by the Ministry of Taxes and Duties, and it was included in the draft amendments to the Tax Code. "But after a detailed study of the issue and the discussions it was decided by the interested parties to exclude this provision of the document".