Beer War: Slovenians on the B&H Market

AIM Banja Luka, July 13, 2001

Amidst the multitude of locally spun stories about the illegal paths of excise goods, drugs, live cattle from Serbia and immigrants from Asia, a peculiar story about a rather suspicious import business deal of Slovenian beer appeared. The story did not originate in a pub, nor was it, as one might think, coined within the Banja Luka brewery, the only profitable firm in the Republic of Srpska (RS). In fact, at the middle of last month, the story flavored with the bitter taste of beer reached the governments of RS and the B&H Federation, the Council of Ministers and federal Customs and Tax administrations in the form of an officially filed document addressed to them.

In a lengthy complaint, four B&H breweries - from Sarajevo, Banja Luka, Tuzla and Bihac - demanded prompt action on the part of the government and its inspection agencies in preventing the illegal import of beers and mineral waters to B&H. The brewers claim that the beer is being imported by means of false invoices made out to sums which are 30 to 40 per cent lower than the actual price of the imported beer, meaning that custom duties and taxes appertaining to the government are being cut down in this manner as well. In some cases, the unregistered portion of the actual price is then realized through a separate invoice, supposedly covering packaging costs.

The brewers seem to be particularly cross with Slovenians, i.e. Pivovarna Lasko. They claim that this brewery has imported 250 thousand hectoliters of beer (75 million of 0,33 lit. bottles) into B&H last year. They estimate that Pivovarna Lasko has thus damaged the federal budget for fantastic DM 5 million.

According to the B&H brewers, recent market studies show that the turnover of Pivovarna Lasko in the Federation has risen for 30 per cent in the initial five months of this year. If their calculations of the last year's budget deficit thus incurred are correct, this means that this year the loss might amount to over DM 10 million! The brewers base their accusations on calculations of the retail price of a Pivovarna Lasko beer marketed in non-returnable 0,33 liter glass bottles. The manufactory price of a beer bottle for the B&H market is DM 0,45. When the 2,5 per cent buyer-discount and the 0,03 transportation tax exemption is added to the sum, what remains is a taxable figure of DM 0,47. With the custom duties, excise and protective taxes, costs of transportation and the profit of the importer added to it, a wholesale price of DM 0,77 remains. When the 20 per cent turnover tax is added to the sum, a retail price amounting to DM 0,92 arises which, if it were correct, would leave no room for profit making. But, since this, obviously enough, has never been the case, what has been going on is that Pivovarna Vlasko has been supplying the B&H market with beers bearing the manufactory price of mere DM 0,30 resulting in the retail price of DM 0,68 at the end of the dubious transaction. Comparative studies, claim the brewers, show that those engaged in the illegal transaction embezzled 0,027 per cent of their profits when custom duties are concerned and around 0,04 per cent of due turnover taxes.

The business manager of the Banja Luka brewery, Slobodan Cubrilo, gives an almost identical calculation for the beer produced by the Union brewery which draws up its B&H export price-lists monthly, tending to steadily reduce the prices. Cubrilo believes that the 30 per cent difference between the actual and the fictitious price of the beer is being reimbursed to the exporters in cash. While insisting that separate invoices supposedly covering packaging costs have never been the standard practice, he maintains that import firms are evading their fiscal obligations by way of cash payoffs to the exporters.

The retail price of a 0,33 lit. bottle of Lasko beer is DM 0,72 which corresponds to the price to which the invoices are made out to – a fictitious one, the complaining brewers claim. A major beer dealer wishing to remain anonymous maintains he pays the importers both through transfer accounts and in cash. He, too, believes a substantial portion of the sum is being handed over to the Slovenians in cash. Asked if there was a way to prove this, he answers: "Yes, by comparing the documentation of the Pivovarna Lasko with that of the import firms from B&H”. The man is absolutely certain that the importers of Slovenian beer have managed to evade paying their taxes up to now: "What is going on is that those importing beer into B&H immediately make out an invoice covering the imported amount of beer to a buyer in RS, the whole procedure then being repeated by the RS buyer, but in the opposite direction, making it impossible to determine where the trailers loaded with imported beer have actually ended up."

The dissatisfied local brewers point out yet another thing: in order to cut down the risks of such dubious dealings, brewers from Slovenia do business with but a limited number of "chosen" importers. Thus, Pivovarna Lasko exports its beers through a private firm, Podovi 2001, based in Gornji Vakuf and owned by a certain Marko Sangro and through Davidov Hram, a Banja Luka based firm owned by Zdravko Mocevic. Representatives of the Banja Luka brewery claim Podovi 2001 has a branch-office operating in the city of Banjaluka as well.

Illegally imported beer is a problem for the (Montenegrin) Niksic brewery, too. The brewery, bought by the Belgian concern Interbrew in 1997, has suffered a 1,9 drop in sales in the past year, caused not only by the imposed economic blockade, but by the inflow of illegally imported beers as well. The general manager of the brewery, Patrik Dirik, points out that 23 varieties of beer are being sold in Niksic, none carrying the proper import-tax labels... By the way, Lasko Pivo happens to be the most sold foreign beer in Montenegro.

The example of the brewery in Niksic is illustrative enough of the risks involved when foreign investments into a country incapable of controlling its own illegal goods market are concerned. The current state of affairs on the B&H beer market certainly does not serve as a solid enough reference for the prospective buyers of Montenegrin breweries put on sale in the course of the privatization process. May it be that thus obtained illegal markets, in fact, represent the desired financial prerequisites for obtaining the planned, extremely low purchase prices of the privatized firms?!

What the reaction of the RS government to the complaints of the local brewers will be remains to be seen. If it turns out these dubious import deals were carried out without the approval of the relevant centers of political might, the findings of the inspection agencies might well prove tax frauds amounting to multi-million sums. Up to that time, all rumors of Slovenian breweries acting as possible accomplices to such illegal schemes will remain mere speculation.

BRANKO PERIC

(AIM)