Malaysian Coffee Shops Seek Beer Tax Cuts as F&B Sales Drop 4.6%
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Malaysian coffee shop operators want tax cuts and phased wage adjustments in the upcoming Budget 2027. The demand follows a 4.6 per cent sales drop across cafes and restaurants.
The Malaysia Singapore Coffee Shop Proprietors’ General Association wants the Ministry of Finance to lower the Sales and Service Tax on alcohol from 8 per cent to 6 per cent. That matches the rate applied to food and non-alcoholic drinks. The group is also urging officials to roll back the beer excise duty increase imposed in the prior budget cycle.
Licensed food and beverage venues rely on beer sales to subsidise fixed overheads like wages, power, and property leases. Retail Group Malaysia recorded a 4.6 per cent year-on-year sales drop in the first quarter of 2026. It was the first quarterly downturn for the country’s restaurant and cafe sector in nearly three years.
Operating Costs Outpace F&B Revenue
Margins are tightening as higher rents and inventory costs hit businesses already suffering from lower footfall. In commercial hubs like Petaling Jaya, monthly retail shop rents jumped from RM6,000 in 2024 to RM12,000 on lease renewals. Keu Kok Meng, Vice President of the Association and Honorary Secretary of the Petaling Jaya Coffeeshop Association, shared the figures.
Industry cost breakdowns show overheads outpace revenue across high-cost venues. William Lee, owner of Yilo Group and President of Persatuan Pemilik Restoran dan Bistro Malaysia, calculated that goods sold take 40 per cent of gross revenue. Staff costs consume 20 per cent, and rent takes 15 per cent. Utilities, promotional spending, and licensing take another 10 per cent each. Those figures push baseline operating costs to 105 per cent of income before tax.
“William Lee, owner of Yilo Group and President of Persatuan Pemilik Restoran dan Bistro Malaysia, calculated that goods sold take 40 per cent of gross revenue.”
Illicit Trade Pressures Regulated Outlets
Cheaper contraband beer is siphoning trade away from licensed outlets. Smuggled, untaxed stock sells at discounts of up to 50 per cent against legitimate supply. That pricing gap lures customers away from traditional street-corner operators that comply with local licensing and tax rules.
Local eateries remain tied to the wider brewing supply chain. Data from the Confederation of Malaysian Brewers Berhad 2025 Economic Impact Assessment shows the domestic industry generates an annual average of RM3.3 billion in tax revenue. It also supports roughly 52,400 jobs across production, logistics, and retail hospitality.
Policy Demands for Budget 2027
Beyond alcohol taxes, trade groups are pushing back on blanket wage mandates. The association wants future statutory wage increases phased in with adjustments for regional living costs and local trading capacity. Members argue flat national hikes would force small operators to cut staff or shorten business hours.
Family-run eateries have minimal cash reserves and struggle to pass cost increases to consumers cutting back on dining out. Previous cost shocks after post-pandemic reopenings left neighbourhood outlets with almost no retained earnings to absorb another hit.
The Timeline for Fiscal Decisions
Finance ministry officials are currently finalizing allocations and tax measures ahead of the national budget presentation. Coffee shop trade groups are lodging formal memoranda with state and federal ministries to secure excise freezes before the fiscal framework is locked in.
Parliament will debate the budget measures in October, when lawmakers decide whether to freeze alcohol excise rates and adjust the service tax threshold for licensed food service providers.
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