Voluntary Report - public distribution

**Date:** 6/2/2004

**GAIN Report Number:** CO4007

CO4007

**Colombia**

**Wine**

**Imports of Wine and Liquors Increased**

**2004**

**Approved by:**

![](media/image1.wmf)David J. Mergen

U.S Embassy

**Prepared by:**

Leonardo Pinzon

**Report Highlights:**

Colombian wine and liquor legal imports and tax collections have
dramatically increased due to the large reduction in consumption taxes
in 2003.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Bogota \[CO1\]

\[CO\]

Legal imports and tax collections have dramatically increased for wine
and liquors due to the large reduction in consumption taxes in 2003.
Liquor imports into Colombia have traditionally faced two main
restrictions; first the high taxes on imported liquors and second, the
legal monopoly on distribution given to the regions, which in turn have
the right to impose additional local taxes.

Tax Law 788 of 2002 (tax reform) modified the calculation of consumption
taxes on alcohol containing beverages, moving from an Ad Valorem
(percentage) tax applied on the customs value plus a 30% markup, to a
specific levy based on the degrees of alcohol, as follows:

+-----------------------+--------------------+------------------------+
| **Alcohol degrees**   | # Specific Levy    |                        |
|                       |                    |                        |
|                       | Per grade of       |                        |
|                       | alcohol content.   |                        |
+-----------------------+--------------------+------------------------+
|                       | **Col pesos**      | **U.S. Dollars \***    |
+-----------------------+--------------------+------------------------+
| **2.5 to 15**         | 122                | 0.04                   |
+-----------------------+--------------------+------------------------+
| **+15 to 35**         | 200                | 0.07                   |
+-----------------------+--------------------+------------------------+
| **+ 35**              | 301                | 0.11                   |
+-----------------------+--------------------+------------------------+

> Note: Currently applied per liter.
>
> \* Exchange rate 2,700 pesos per \$

The value of the specific tax is adjusted annually for changes in
inflation.

As a result of this change, the relative price of imported liquors
(particularly high priced liquors) was dramatically reduced. The price
reduction ranged from 10 to 40 percent according with the Importers
Association.

Consumption of liquor legally imported is now displacing the previously
high level of smuggled liquor. Supermarkets and specialized stores have
become the main suppliers of imported alcohol beverages, since the price
difference between legal and smuggled liquor has been reduced from 100
percent to less than 10 percent. The legal liquor sold through these
outlets also has the added advantage of being less likely to be
adulterated.

The reduction in smuggling and increased consumption can be seen in the
large increase in official import trade data since the reduction in the
consumption tax. The following table shows the change in imports.

  ------------- --------------- --------------- ------------- --------------- --------------- -------------
  **Colombia:                                                                                 
  Liquor and                                                                                  
  Wines                                                                                       
  Imports**                                                                                   

  **( 9 liters                                                                                
  boxes)**                                                                                    

                **2002**        **2003**        **2002-03**   **2003**        **2004**        **2002-03**

                **Jan - Dec**   **Jan - Dec**   **Growth**    **Jan-March**   **Jan-March**   **Growth**

                                                                                               

  **Wine**      **655,486**     **754,700**     **15.1%**     **73,397**      **134,698**     **83.5%**

  Chilean       390,380         485,547         24.4%         49,055          80,082          63.2%

  Others        265,106         269,153         1.5%          24,342          54,616          124.4%

  **Liquors**   **358,171**     **477,755**     **33.4%**     **27,229**      **206,618**     **658.8%**

  **Total**     **1,013,657**   **1,232,455**   **21.6%**     **100,626**     **341,316**     **239.2%**
  ------------- --------------- --------------- ------------- --------------- --------------- -------------

Source: DIAN

The Government has increased the taxes collected due to the increased
imports (and greater collection of import duties) and through expanded
marketing through supermarkets and specialty liquor stores that collect
and pay consumption taxes. Figures from the National Regions Federation
show the following increase in consumption taxes collected:

  ---------------- ------------- ------------- ------------- --------------- -------------
  **Colombia: Tax                                                            
  Collection on                                                              
  Consumption of                                                             
  Imported                                                                   
  liquors**                                                                  

  **(\$ ,000 and                                                             
  percentages)**                                                             

                   **2002**      **2003**      **2002-03**   **2004**        **2004-03**

                   ** **         ** **         **Growth**    ** **           **Growth**

  **January**      210.7         227.1         **7.8%**      2,932.9         **1191.6%**

  **February**     398.8         394.8         **-1.0%**     1,171.4         **196.7%**

  **March**        257.4         875.9         **240.3%**    2,568.0         **193.2%**

  **April**        545.2         1,078.2       **97.7%**     966.1           **-10.4%**

  **Total**        **1,412.2**   **2,575.9**   **82.4%**     **7,638.4**     **196.5%**
  ---------------- ------------- ------------- ------------- --------------- -------------

Source: National Regions Federation

The decrease in consumption taxes has been a highly successful policy,
which has resulted in an increase in tax payments and a reduction in
smuggling, benefiting the government, local distribution channels,
imports and consumers.