BOGOTA -(Dow Jones)- SABMiller PLC (SAB.JO) controls 98% of the Colombian beer market, is an active lobbyist in Colombia's corridors of power and finances the campaigns of politicians of all stripes, but none of that was enough to stop the government from sharply raising the tax on beer Monday.

The tax rise suggests SABMiller has lost some of its political clout in Colombia, though the company is unlikely to sit on its hands as Congress moves to debate whether to strike down the tax hike.

"We are disappointed," SABMiller London-based spokesman Nigel Fairbrass said Jan. 22 after Colombian Finance Minister Oscar Ivan Zuluaga announced the value-added tax on beer will more than quadruple to 14% from a previous 3%. The tax rate is set to further rise to 16% in 2011.

The tax increase is part of emergency decrees announced by the government in late January. The decrees took effect Monday, but still need to be ratified by Congress to remain in place.

Beer producers in Colombia also pay a 48% sales tax to provinces. The tax rise will make Colombian beer among the most heavily taxed in Latin America. In other countries in the region, consumer taxes on beer are generally lower than 50%.

Colombia is SABMiller's second-largest market for lager after its home country South Africa. Its Colombian operation contributed almost 14% of the beer maker's net profit in 2009.

After the announcement, SABMiller's shares in London fell 1.9% on Jan. 25, the next trading day.

SABMiller expects its 2010 sales in the country to be 4.5% lower with the tax increase than they would have been without it, Fairbrass said.

Bavaria SA, SABMiller's local unit and Colombia's eighth-largest company, will transfer the tax to its customers by raising the price of beer by about 100 pesos (5 U.S. cents) per bottle. The company will respond to lower sales by cutting operating costs, which it said could mean job cuts and even the closing of one of its breweries.

That may not prove very popular, as at least one powerful lawmaker recognizes.

"I wouldn't expect a debate before March, as people are busy with the election campaign," said the president of the Colombian Senate, Javier Caceres. Congressional elections are scheduled in March.

Caceres said people oppose "some parts" of the tax hike package, "and the Senate must respect the will of the citizen."

The tax hike represents a shift in the company's fortunes.

Bavaria's previous owner, Colombian billionaire Julio Mario Santo Domingo, was known for his considerable influence in Colombian politics, helping smooth his takeover of all the significant breweries in the country.

In addition to his capacity to contribute to the campaigns of elected officials, Santo Domingo, Colombia's richest man, also had familial ties to people in high places. He is the cousin of one late Colombian president and the nephew of another.

In 2005, SABMiller paid Santo Domingo's group the equivalent of about $7.8 billion in cash and stocks for his stake in Bavaria, which also owned breweries in Ecuador, Panama and Peru.

Santo Domingo obtained a 15.1% stake in SABMiller out of the deal and sent two relatives onto the company's 24-member board. None of them were immediately available for comment.

SABMiller may yet succeed in blocking or amending the tax rise.

"In theory, the Congress could overturn all or part of it," said German Puentes, a law professor at Bogota's Universidad del Rosario. "But the government probably secured the support of Congress before enacting the decrees."

SABMiller's Fairbrass said the company plans to keep contributing to political campaigns across the political spectrum.

"We intend to provide similar support going into the next congressional elections as in 2006," he said in a telephone interview. Fernando Jaramillo, Bavaria's vice president of corporate affairs, declined to disclose the amount the company spends on campaign financing.

Meanwhile, SABMiller has also taken its complaint straight to the author of the decree raising its taxes.

SABMiller's world chief executive, Graham McKay, met Colombian President Alvaro Uribe in Davos, Switzerland, on Thursday. He voiced his concerns about the declining sales the tax increase would cause, Uribe's press office said, though the office didn't disclose what the president answered to McKay.

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