In the association's statement, it is noted that sugar and its derivatives are crucial for food security. This creates a contradiction, as the state spends significant funds to support farmers and processors, while an increase in tax burden could negatively impact the economic attractiveness of processing agricultural raw materials.
The production of compotes, nectars, and fruit drinks depends on the procurement of raw materials from local farmers. An increase in excise taxes could lead to the following negative consequences:
- increased production costs;
- decreased competitiveness of domestic producers;
- reduction in raw material purchases;
- decreased income for farming households;
- underutilization of processing enterprises;
- reduction of jobs in the regions.
Thus, the tax initiative aimed at reducing consumption may have negative consequences for the rural economy, the association warns.
Moreover, experts emphasize that the increase in tax burden will inevitably lead to higher prices for local products.
“The market of the Kyrgyz Republic is open, and products from neighboring countries such as Afghanistan, Kazakhstan, Uzbekistan, and Russia are already actively present. In recent years, there has been an increase in the import of sweet beverages, which are distributed through retail chains and catering establishments. If excise taxes on domestic goods rise, consumers may start opting for cheaper imported alternatives. This could lead to a loss of market share for local producers. Ultimately, the tax measure may not only fail to improve public health but also lead to a market redistribution in favor of imported products,” the statement reads.
There is also a concern that producers' desire to reduce the tax burden may provoke a shift to artificial sweeteners, which does not always align with the goals of improving public health.
The association reminded that a sharp increase in excise taxes in the past led to:
- growth of the illegal trade;
- smuggling;
- increased share of the unaccounted market.
The statement emphasizes that there is no appropriate laboratory infrastructure in Kyrgyzstan for the prompt control of sugar content and regular inspections.
Producers and processors support ideas for improving public health but insist on a comprehensive approach that should include:
- educational programs;
- information campaigns;
- formation of a healthy eating culture;
- development of physical activity.
Fiscal measures should be considered as one of the tools of policy, not the primary method of regulation, the association concluded.
It is worth noting that the country currently has a unified excise tax on sugar-containing beverages of 3 soms per liter, regardless of sugar content. The new initiative proposes a transition to a differentiated system, where the rate will depend on the sugar level in the beverages.
