Review of Excise Taxes: Business Demands
The Association of the Agro-Industrial Complex of the Kyrgyz Republic has expressed its concerns regarding the initiative from the Ministry of Health, which implies the introduction of a tax on so-called harmful products (Public Health Product Tax).The new initiative proposes to increase the excise tax on sweet beverages from the current 3 soms per liter to a range of 5 to 11 soms, as well as the introduction of additional excise taxes on energy drinks and salty snacks. It is expected that the funds from the tax will be directed to the National Health Fund.
Negative Consequences for Processing
Representatives of the agribusiness emphasize that they support initiatives aimed at improving public health; however, changes require a thorough assessment of possible economic and social consequences.In their opinion, the increase in excise taxes may contradict the state strategy for the development of the agro-industrial complex, which aims to increase the level of agricultural product processing by 50% by 2030.
At the same time, a significant portion of processed products, such as compotes, nectars, fruit drinks, and juices, is made from fruits and berries.
Risks for Agriculture
The Agricultural Association notes that increasing excise taxes could raise the cost of production, which, in turn, would reduce the competitiveness of local producers and the volume of agricultural raw material purchases from farmers.This could lead to a decrease in the workload of processing enterprises and job losses in the regions.
Import and Shadow Market
The industry also expresses concerns that local products may be displaced by cheaper imported analogs from neighboring countries. Businesses believe that in an open market, an increase in the tax burden could shift demand in favor of imported products.Furthermore, producers emphasize the presence of administrative difficulties — the country currently lacks laboratory infrastructure to monitor sugar content in products, complicating the administration of new excise rates.
Maintaining Current Conditions
Representatives of the agro-industrial complex are calling for the preservation of the current level of tax regulation and for further discussion of the issue involving businesses, relevant ministries, and experts.“It is important for state policy to remain consistent. We support measures to improve public health, but such decisions must be made considering their real economic consequences. Changes in the tax burden should be assessed in terms of their impact on farmers, agricultural product processing, and the sustainability of the agro-industrial complex of the country,” noted Rustam Baltabaev, a representative of the industry.
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