The government is considering increasing the duties on alcoholic beverages before the Chinese New Year.

According to a report in Sin Chew Daily yesterday, a 10% hike is expected in the duties for liquor and other alcoholic drinks.

The report said the new rates are expected to take effect on Feb 1, which means the “yam seng” (toast) is going to be more expensive for the upcoming Spring festival.

At RM7.40 a litre, the beer excise duty in Malaysia is third highest in the world, after Norway and Singapore.

A source said a hike in duties on alcoholic beverages, which was not done in the last 10 years, is inevitable but said the government has not finalised the date of implementation due to a conflict of opinions on the timing.

It is learnt that officials in favour of a hike before the Chinese New Year believe it would boost the government coffers due to the big demand during the festival but detractors said increasing duties before the festival would dampen sales and encourage smuggling activities.

The sources said the hike would cover all alcoholic drinks except herbal wines.

Customs director-general Datuk Seri Khazali Ahmad, when contacted by the Chinese daily, said he was not aware of the matter and could not confirm or deny talk of the impending hike.

Analysts said a 10% increase in duties on alcoholic drinks will boost the government coffers by RM150 million a year.

However, brewers opined that sky-high duties on beers would impact negatively on the tourism industry in the long run, especially when competitors for tourist dollars such as Thailand, Hong Kong, Vietnam, and India have much cheaper beers.

“The notion that raising the duties on beer can boost the government coffers is a misconception. The examples of many countries show that increasing the duties only encourages smuggling activities, as well as prompting many drinkers to switch to cheaper beverages with higher alcohol content.”