Alcohol taxation, specifically excise taxes on alcohol, is one of the World Health Organization’s recommended alcohol policy best-buy solutions to for governments to tackle alcohol harm. It is the single most cost-effective alcohol policy solution to protect people from alcohol harm, including in low- and middle-income countries such as India.
Nevertheless, recently alcohol giant Pernod Ricard has attacked the Indian government over a tax dispute which has been ongoing in India for 30 years. The dispute initially arose in 1994 regarding import valuation by the customs authority. It has not yet been resolved.
The dispute with the tax authority is regarding how the alcohol giant values its imported liquor bottles and raw material and pays taxes on them. As per a source, the Indian authorities allege that Pernod Ricard suppresses the costs of imports.
There are two main issues:
- Disputes at various tribunals over valuation of concentrated alcohol Pernod brings in to manufacture liquor locally.
- Issues related to “bottled-in-origin” products like Chivas that are imported in bottles.
Indian authorities have questioned Pernod Ricard’s costing methods and payment of taxes in both instances.
Indian authorities propose in the case of bottled-in-origin products, such as Chivas, to add advertising and promotion expenses to the import value and pay tax on that. However, Pernod Ricard disagrees with this approach and hence there has been a long-standing tax dispute.
Now Pernod Ricard claims any increase in taxes on products that had been imported many years ago can cause a “heavy financial burden” on the company. The French transnational alcohol giant is asking for a settlement of the disputes in a reasonable manner, requesting “sympathetic consideration”.
Pernod Ricard wants the dispute settled as it is holding up consignments at ports and investments to expand its business in India. Therefore it is preventing the company from maximizing its profits in India.
Pernod Ricard is planning to set up new production lines to increase the production of their alcohol products by 40% in India. This would lead to further saturating Indian communities with even more alcohol, even though most Indians do not consume any alcohol.
This plan would increase Pernod Ricard’s export earnings by a third to $126 million in the next five years.
Lobby for alcohol tax reductions
Meanwhile, Big Alcohol, including Pernod Ricard have used their lobby front group ISWAI o use the proposed UK-India Free Trade Agreement (FTA) to push for a slashing of the 150% import tax on foreign alcohol products to only 75% immediately and then to 30% over the next 3 years.
The International Spirits & Wines Association of India (ISWAI) directly represents Big Alcohol corporations Bacardi, Beam Suntory, Brown Forman, Campari Group, Diageo, Moet Hennessey, and Pernod Ricard.
According to Thibault Cuny, Pernod Ricard, South Asia CEO, Pernod Ricard is “going after zero” with regards to the customs duty on imported alcohol products.
Pernod Ricard is pushing so hard to increase alcohol sales in India since the Indian alcohol market is predicted to grow by 7% annually in the 2021-25 period, as per the IWSR Drinks Market Analysis. Currently, Pernod Ricard accounts for 17% of the Indian alcohol market while competitor Diageo has a 29% share. Evidently, Pernod Ricard is going after a bigger chunk of the profits.
Asia Financial: “Pernod Ricard Warns India Over 30-Year Alcohol Tax Wrangle“
Reuters: “Exclusive: Pernod told India its protracted tax fight inhibits fresh investments there“