AmBev, Heineken and Coca-Cola fight against monitoring changes

The Brazilian producers of beverages, including groups that represent AmBev, Heineken and Coca-Cola, are fighting against a change in the system of production monitoring for purposes of taxation that, according to them, will leave the industry exposed to fraud and put trade secrets at risk.
In the new system, called Block K, companies will be responsible for reporting to tax authorities, manually, the quantity of ingredients bought and the volumes produced by them.
The system would replace the use of machinery to monitor the volumes produced from soda and beer--high-cost technology designed to reduce tax fraud, but that turned out to be considered overkill.
The IRS says that change is needed to cut costs and make better use of the revenue generated by State and federal taxes which, combined, account for an average of 44% in the case of beer.
But the change occurs in difficult time for Ambev, Brazil''s largest sale in the brewery, controlled by the multinational giant AB InBev. To adopt the new system, companies will have to stop production at the end of the year, at the height of summer in the southern hemisphere, according to Sicpa Brazil, company that makes the current system.
And Ambev is still working to recover from the slowdown of sales that hurt its results for the first half of the year. The great producers also deal with an expanding group of craft breweries and don''t want to make life easier for small.
Beverage industry trade associations said that the new method of taxation can allow smaller competitors mask production numbers to pay less taxes, thus offering prices below those of larger competitors.
In August, the Abir (Brazilian Association of manufacturers of soft drinks and non-alcoholic drinks), the Abrape (Brazilian Association of drinks), the CervBrasil (Brazilian Association of the industry of Beer) and the Etco (Brazilian Institute of Competitive Ethics) told the Federal Revenue Secretary, Jorge Rachid, in letter, which were concerned with the replacement of the monitoring systems.
AmBev, Heineken and Coca-Cola refused to comment. Several phone calls and e-mails sent to the internal revenue service had no return. The Agency gave no indication that rolls back or postpone its decision.