In its appeal, the AIC points to a paradoxical situation: on one hand, the government spends funds to support farmers, while on the other, it introduces measures that could significantly increase the tax burden on the processing of agricultural products. This, according to the association, may reduce the economic attractiveness of processing and negatively affect farming households.
It is important to note that the production of beverages such as compotes and nectars depends on the procurement of raw materials from local farmers. Therefore, an increase in excise taxes could lead to the following consequences:
- increased production costs;
- decreased competitiveness of local producers;
- reduction in the volume of raw material purchases;
- decreased income for farmers;
- reduced capacity utilization of processing enterprises;
- loss of jobs in the regions.
Thus, measures aimed at regulating consumption could have a negative impact on the rural economy, which raises concerns among association representatives.
Furthermore, they are convinced that increasing the tax burden will lead to higher prices for local products.
There are already many imported beverages from neighboring countries such as Afghanistan, Kazakhstan, Uzbekistan, and Russia present in the open market of the Kyrgyz Republic. In recent years, there has been a rise in the supply of sweetened water, which is actively promoted through retail chains and restaurants. If excise taxes on local beverages increase, consumers may switch to cheaper imported options, leading to a loss of market share for local producers and not improving public health.
The association also notes that attempts to reduce the tax burden may result in the substitution of natural sugar with artificial sweeteners, which does not always align with the goals of improving public health.
Additionally, the association reminded that sharp increases in excise taxes in the past have led to a rise in illegal turnover, smuggling, and an increase in the share of the unaccounted market.
The appeal also emphasizes that there are insufficient laboratory resources in Kyrgyzstan to monitor sugar content in products.
Producers and processors recognize the importance of measures to strengthen public health but propose a more comprehensive approach, including:
- educational initiatives;
- information programs;
- formation of healthy eating habits;
- development of physical activity.
Fiscal measures should be viewed as one element of an overall strategy, rather than as the sole regulatory tool, the association concludes.
Currently, the country has a unified excise tax on sugar-containing beverages of 3 soms per liter, regardless of sugar content. The proposed initiative suggests a transition to a differentiated system, where the rate will depend on the sugar level in the beverage.
