PepsiCo and Coca Cola Makers Warn Against Proposed ‘Sugar Tax’ on Drinks

The beverage industry has informed the Federal Board of Revenue (FBR) that the proposed four percent federal excise duty (FED), also known as the sugar tax, will not only increase prices but also impact the $200 million investment projects of two major carbonated soft drink companies, PepsiCo and Coca-Cola. During a meeting with the finance minister, the companies committed to securing loans worth around $200 million from their parent companies to bring revenue into Pakistan. The finance ministry has decided to restrict imports of critical materials, technology, and equipment in order to accumulate dollars imported into the country by these companies. Both companies have jointly addressed a statement to the Prime Minister, expressing their concern that the proposed FED on beverages is unjust, as it is imposed primarily on the carbonated drink or aerated water industries. The companies emphasized the importance of a tax policy in Pakistan that supports local manufacturing, noting that the total taxes, including sales tax and FED, could reach as high as 30%. They also pointed out that their sector is the only one within the food and beverage industry that pays the FED. The beverage industry giants further argued that they are the only industry paying “water costs” among other water-consuming businesses, and the only one in the F&B sector where a health fee is proposed. They claimed that imposing the sugar tax on top of the already substantial FED will result in double taxation and the collapse of legitimate taxpaying beverage makers. They have requested that the FED retain its current rate of 13 percent, considering the recent rise in critical raw material prices, increasing inflation, disruptions in supply chains, and to enable the industry to continue its growth.