The Association for the Development of the Agro-Industrial Complex of Kyrgyzstan has issued a statement regarding the initiative of the Ministry of Health to increase excise taxes on sugary drinks. The document highlights the potential consequences for the processing of agricultural raw materials, farms, 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
(by list)
OPEN ADDRESS
of producers and processors of the agro-industrial complex regarding the initiative to increase excise taxes on sugary drinks.
Dear Sadyr Nurgoyevich,
Dear Adylbek Alekseevich,
Dear Erlis Abakirovich,
Dear Deputies of the Jogorku Kenesh,
The Association representing domestic producers and processors of agricultural products expresses its respect and considers it important to state its position regarding the initiative of the Ministry of Health to increase excise taxes on sugary drinks.
The Ministry of Health proposes to introduce a mechanism for taxing harmful products (Public Health Product Tax), which implies changing the current excise rate from 3 soms per liter to a differentiated scale from 5 to 11 soms per liter, as well as introducing new excise taxes on energy drinks and salty snacks. It is expected that the revenues from this tax will be directed to the National Health Fund to finance preventive programs and the healthcare system.
The Association acknowledges the need to strengthen citizens' health and prevent non-communicable diseases. However, this initiative requires a thorough assessment considering the economic, social, and sectoral consequences.
In this regard, we would like to draw your attention to several systemic problems and risks associated with the proposed changes.
The paradox of state policy in the agro-industrial complex
Currently, the state policy of the Kyrgyz Republic is focused on the development of the agro-industrial complex, import substitution, and ensuring the country's food security.
The Cabinet of Ministers 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, and others)
Through mechanisms such as preferential lending programs and financial instruments to support farmers and processors (CAPK, FSH, FOTP, etc.), the state annually allocates significant resources for the development of the agricultural sector.
At the same time, sugar and its processed products are related to food security.
Thus, a clear paradox arises: the state on one hand allocates significant funds to assist farmers and processors, while at the same time proposes measures that significantly increase the tax burden on processed agricultural products.
Inconsistency of the initiative with the strategic objectives of agro-industrial development
The Presidential Decree of the Kyrgyz Republic No. 202 "On Additional Measures for the Development of the Agro-Industrial Complex" sets a strategic objective:
- 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 the processed products from fruits and berries is sold in the form of compotes, nectars, mors, and fruit drinks. The proposed increase in excise burden may actually reduce the economic attractiveness of processing agricultural raw materials, which contradicts the tasks set by the President of the Kyrgyz Republic.
Risks for farmers and rural regions
The production of compotes, nectars, and fruit drinks directly depends on the purchase of agricultural raw materials from domestic farmers.
The increase in excise burden may lead to the following consequences:
- increased production costs
- decreased competitiveness of domestic producers
- reduction in the purchase of agricultural raw materials
- decreased income of farming households
- reduced capacity utilization of processing enterprises
- job cuts in rural areas
Thus, the tax measure aimed at regulating consumption may negatively impact the rural economy.
Risk of displacing domestic producers with imported products
The increase in tax burden will lead to higher prices for domestic products. At the same time, the market of Kyrgyzstan remains open, and products from neighboring countries — Afghanistan, Kazakhstan, Uzbekistan, the Russian Federation, and others — are already actively represented in it.
In recent years, there has been an increase in supplies of sugary water and drinks, which are actively advertised through HoReCa channels and retail networks.
In the event of an increase in excise taxes on domestic products, a situation may arise where:
- consumers prefer cheaper imported drinks
- domestic producers lose part of the market
- support for farmers from other countries effectively occurs
As a result, the tax measure may not improve public health but, on the contrary, lead to market redistribution in favor of imported products.
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 have been introduced.
However, direct comparison with the conditions of the Kyrgyz Republic is inappropriate for a number of structural reasons.
First, these countries 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 more easily with additional tax burdens.
Third, these countries have effective tax administration systems that allow for accurate determination of product composition and sugar content, as well as correct tax administration.
Fourth, they have developed laboratory and control infrastructure that ensures systematic monitoring of the quality and composition of food products.
In contrast, Kyrgyzstan falls into the category of economies where the processing industry is in the stage of formation. According to the relevant agency, currently less than 10% of agricultural products are processed, indicating a weak industrial base in the sector.
In these conditions, mechanically transferring foreign models of tax regulation that do not take national characteristics into account may have negative consequences for domestic production.
Administrative risks and lack of laboratory infrastructure
The proposed measure includes differentiation of excise rates depending on sugar content. However, Kyrgyzstan currently lacks sufficient laboratory infrastructure capable of ensuring:
- rapid determination of sugar content
- regular laboratory monitoring
- effective administration of such a tax
This creates a risk of:
- inaccurate declaration of product composition
- increased administrative burden
- emergence of additional opportunities for unfair competition.
Possible encouragement of the use of artificial sweeteners
Producers' desire to reduce tax burdens may lead to the replacement of sugar with artificial sweeteners. International studies indicate that prolonged consumption of certain sweeteners raises debates among specialists about their impact on human health.
Consequently, the proposed measure may lead to the 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 in illegal trade
- smuggling of products
- increased share of the unaccounted market
For the small market of Kyrgyzstan, such risks are particularly significant.
Contradiction to state policy on inflation control and price stabilization
Currently, the Cabinet of Ministers of the Kyrgyz Republic is implementing a number of measures aimed at controlling inflation, ensuring food security, and stabilizing prices for socially important food products.
These measures are aimed at supporting agricultural production, developing the processing of agricultural raw materials, increasing the supply of goods in the domestic market, and ensuring the availability of food products for the population.
In this regard, the proposed initiative to increase the excise burden on sugary drinks may have the opposite effect.
Increasing the tax burden will undoubtedly lead to an increase in the cost of processed products and, consequently, to an increase in retail prices.
Thus, this measure may create additional inflationary pressure and contradict the state policy aimed at stabilizing prices for food products.
The need for a comprehensive approach to public health issues
The Association fully supports the need for measures to improve the health of the population.
However, addressing this issue requires a comprehensive approach that includes:
- educational programs
- information campaigns
- formation of a culture of healthy eating
- development of physical activity
Fiscal measures should be viewed as just one element of policy, not as the primary tool for regulation.
The issue of consistency in state policy
The business community notes that this initiative has already been discussed within the Interagency Working Group on amending the Tax Code of the Kyrgyz Republic at the Ministry of Economy and Commerce in 2025 and did not receive support.
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, where international consultants and project experts are involved.
Business observes with interest and surprise that year after year such initiatives return to the agenda, despite previously made decisions.
We respect international experience and recommendations from international organizations; however, when forming state policy, it is necessary to consider national economic characteristics, the level of industrial development, and the priorities of the country's food security.
In light of the above, representatives of the agro-industrial complex of Kyrgyzstan find it advisable to maintain the existing conditions of tax regulation and avoid making decisions that could negatively impact:
- 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 request that you consider the possibility of rejecting the proposed project to increase excise rates on sugary drinks and continue the dialogue involving business, relevant ministries, and the expert community to develop balanced solutions.
“An important aspect is the consistency of state policy. We support measures to strengthen the health of the population; however, such decisions should be made considering their real economic consequences. Changes in the tax burden should be assessed 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 sugary drinks first appeared on K-News.
