The Association for the Development of the Agro-Industrial Complex of Kyrgyzstan has sent an appeal regarding the proposal from the Ministry of Health to increase excise taxes on sugar-containing beverages. This appeal emphasizes the potential consequences for the processing of agricultural raw materials, farming households, and price stability in the domestic market. (text below)
To the President
of the Kyrgyz Republic
S.N. Japarov
To the Chairman of the Cabinet of Ministers
of the Kyrgyz Republic
A.A. Kasymaliev
To the Deputy Chairman of the Cabinet of Ministers - Minister of Water Resources, Agriculture, and Processing Industry of the Kyrgyz Republic
E.A. Akunbekov
To the Deputies of the Jogorku Kenesh of the Kyrgyz Republic
(by list)
OPEN APPEAL
of producers and processors of the agro-industrial complex regarding the initiative to increase excise taxes on sugar-containing beverages.
Dear Sadyr Nurgozhoevich,
Dear Adylbek Aleshovich,
Dear Erlis Abakirovich,
Dear Deputies of the Jogorku Kenesh,
The Association for the Development of the Agro-Industrial Complex of the Kyrgyz Republic, representing the interests of domestic producers and processors of agricultural products, expresses its respect to you and considers it important to convey the opinion of the agricultural and processing sector regarding the proposal to increase excise taxes on sugar-containing beverages put forward by the Ministry of Health of the Kyrgyz Republic.
The Ministry of Health proposes to implement a mechanism for taxing harmful products (Public Health Product Tax), which involves changing the current excise rate (3 soms/liter) to a differentiated scale from 5 to 11 soms per liter, as well as introducing additional excise taxes on energy drinks and salty snacks. It is expected that the funds from this tax will be directed to the National Health Fund to finance preventive programs and healthcare systems.
The Association recognizes the importance of strengthening public health and combating non-communicable diseases. However, the proposed measure requires a comprehensive analysis taking into account economic, social, and sectoral consequences.
In this regard, it is necessary to pay attention to a number of systemic problems and risks associated with the proposed changes.
The paradox of state policy regarding the agro-industrial complex
Currently, the state policy of the Kyrgyz Republic is aimed at developing the agro-industrial complex, import substitution, and ensuring the country's food security.
The Cabinet of Ministers of the Kyrgyz Republic implements large-scale programs to support farmers and the processing industry through:
- The Ministry of Water Resources, Agriculture, and Processing Industry of the Kyrgyz Republic
- The Ministry of Economy and Commerce of the Kyrgyz Republic
- The Ministry of Finance of the Kyrgyz Republic
- State financial institutions and agricultural support programs (banks, regional development funds, etc.)
Through mechanisms such as preferential lending programs and financial support instruments (CAPC, FSH, FOTP, etc.), the state allocates significant funds annually for the development of the agricultural sector.
At the same time, sugar and its processed products fall into the category of food security.
Thus, a clear paradox arises: on one hand, the state allocates significant funds to support farmers and processors, on the other hand, measures are proposed that significantly increase the tax burden on processed agricultural products.
Inconsistency of the initiative with the strategic objectives of agro-industrial development
By the decree of the President of the Kyrgyz Republic No. 202
“On Additional Measures for the Development of the Agro-Industrial Complex”
a strategic objective has been set:
- to increase the volume of agricultural product processing by 50% by 2030.
To achieve this goal, the state:
- stimulates the creation of processing enterprises
- supports the formation of value-added chains
- stimulates the purchase of agricultural raw materials from farmers
At the same time, a significant portion of processed products from fruits and berries is sold in the form of: compotes, nectars, juices, and fruit drinks. Increasing the excise tax burden may reduce the economic attractiveness of processing agricultural raw materials, which contradicts the objectives set by the President of the Kyrgyz Republic.
Risks for farmers and rural regions
The production of compotes, nectars, and fruit drinks depends on the purchase of agricultural raw materials from local farmers.
Increasing the excise tax burden may lead to the following consequences:
- increased production costs
- decreased competitiveness of local producers
- reduction in purchases of agricultural raw materials
- decreased income for farming households
- decreased load on processing enterprises
- reduction of jobs in the regions
Therefore, the tax measure intended to regulate consumption may negatively impact the rural economy.
Risk of displacing domestic producers with imported products
Increasing the tax burden will inevitably lead to an increase in prices for domestic products. At the same time, the Kyrgyz market remains open, and products from neighboring countries - Afghanistan, Kazakhstan, Uzbekistan, Russia, etc. - are already actively represented.
In recent years, there has been an increase in supplies of sweetened water and beverages, which are actively promoted through HoReCa channels and retail networks.
If excise taxes on domestic products are increased, this may create a situation where:
- consumers will choose more affordable imported beverages
- domestic producers will lose market share
- effectively, support will be provided to farmers from other countries
Thus, the tax measure may not improve public health, but rather lead to a redistribution of the market in favor of imported goods.
Limited applicability of international experience
The justification for the initiative cites examples from countries such as Hungary, Mexico, and Norway, where taxes on certain categories of harmful products are in effect.
However, comparing these countries with the conditions of the Kyrgyz Republic is incorrect for a number of structural reasons.
First, these states have significantly higher income levels, which reduces society's sensitivity to rising food prices.
Second, their economies are characterized by developed processing industries and high added value of products, which allows enterprises to cope with additional tax burdens.
Third, these countries have effective tax administration systems, which allow for accurate determination of product composition, sugar content levels, and proper administration of relevant taxes.
Fourth, these countries have a developed laboratory and control infrastructure that ensures systematic monitoring of the quality and composition of food products.
In contrast, Kyrgyzstan is at the stage of forming its processing industry. According to the relevant authority, currently, no more than 10% of agricultural products are processed, which indicates a weak industrial base in the sector.
In such conditions, mechanically transferring foreign models of tax regulation without considering national peculiarities may lead to negative consequences for local production.
Administrative risks and lack of laboratory infrastructure
The proposed mechanism implies differentiation of excise rates depending on sugar content. However, Kyrgyzstan currently lacks sufficient laboratory infrastructure that could ensure:
- operational determination of sugar content
- regular laboratory control
- effective administration of such a tax
As a result, there is a risk of:
- inaccurate declaration of product composition
- increased administrative burden
- emergence of additional opportunities for unfair competition.
Possible stimulation of the use of artificial sweeteners
The desire of producers to reduce tax burdens may lead to the replacement of sugar with artificial sweeteners. International studies show that prolonged consumption of certain artificial sweeteners raises discussions among specialists regarding their impact on human health.
Thus, the proposed measure may lead to a replacement of natural sugar with chemical analogs, which does not always align with the goals of improving public health.
Risks of growth in the shadow market
International practice has shown that a sharp increase in excise taxes leads to:
- growth of illegal turnover
- smuggling of products
- increased share of the unaccounted market
For the small market of Kyrgyzstan, such risks are particularly relevant.
Contradiction to state policy on inflation control and price stabilization
Currently, the Cabinet of Ministers of the Kyrgyz Republic is implementing measures aimed at controlling inflation, ensuring food security, and stabilizing prices for socially significant food products.
These measures are aimed at supporting agricultural production, developing the processing of agricultural raw materials, expanding the supply of products in the domestic market, and ensuring the availability of food products for the population.
In this context, the initiative to increase the excise tax burden on sugar-containing beverages may lead to the opposite effect.
Increasing the tax burden will inevitably lead to an increase in the cost of processed products and, consequently, to a rise in retail prices.
Thus, the proposed measure may create additional inflationary pressure and contradict the state policy being implemented to stabilize prices for food products.
The need for a comprehensive approach to public health issues
The Association fully supports the need to implement measures to strengthen public health.
However, addressing this issue requires a comprehensive approach, including:
- educational programs
- information campaigns
- formation of a culture of healthy eating
- development of physical activity
Fiscal measures should be considered only as one element of policy, not as the primary regulatory tool.
The issue of consistency in state policy
The business community notes that this initiative has already been discussed within the Interagency Working Group on amendments to the Tax Code of the Kyrgyz Republic at the Ministry of Economy and Commerce of the Kyrgyz Republic in 2025 and was not supported at that time.
Nevertheless, similar proposals are repeatedly brought up for discussion. At the same time, the initiative is promoted within the projects of the Ministry of Health of the Kyrgyz Republic, where international consultants and project experts work.
Business observes with interest and a certain surprise that year after year such initiatives return to the agenda, despite previously made decisions.
We respect international experience and recommendations from international organizations, but when forming state policy, it is necessary to consider national economic features, the level of industrial development, and the priorities of food security in the country.
Considering the above, representatives of the agro-industrial complex of the Kyrgyz Republic find it advisable to maintain the current conditions of tax regulation and avoid making decisions that could negatively affect:
- the development of the processing industry
- the income of farmers
- the competitiveness of domestic producers
- the sustainability of the agro-industrial complex.
In this regard, we call for the consideration of the possibility of rejecting the proposed project to increase excise rates on sugar-containing beverages and to continue dialogue involving business, relevant ministries, and the expert community to develop balanced solutions.
“It is important for state policy to be consistent. We support measures to strengthen public health, but such decisions should be made considering their real economic consequences. Changes in tax burdens should be evaluated in terms of their impact on farmers, the processing of agricultural raw materials, and the sustainability of the domestic agro-industrial complex” — Baltabaev R.
The post The Association of the Agro-Industrial Complex opposes the initiative of the Ministry of Health of Kyrgyzstan to increase excise taxes on sugar-containing beverages first appeared on K-News.
