Review levies on low-end market, Keroche Industries tells MPs

KENYA – Keroche Industries has petitioned Parliament to review taxation on alcoholic products targeted for the low-end market.

In a brief to the Finance, Planning and Trade committee on Monday, the Naivasha-based brewer called for the establishment of a sustainable taxation regime as opposed to zero- rating, which it said had the effect of reducing government revenue.

“Zero-rating is not an option as it will imply a reduction on revenue collection, with the spiral effect of increasing taxes, increasing prices and finally losing on the very war that we have persistently been fighting against,” the document signed by CEO Tabitha Karanja said.

Keroche said attempts by alcohol makers to target the low-end market with cheap products had been reversed by high taxes that price the products way above the target market.

“Legal brew is a luxury, and therein lies the problem… there will always be a way to make cheap and illicit brews as long as conventional alcohol remains expensive,” she said.

Keroche cited examples of its Viena Fortified Wine that was introduced for the low-end consumers, but a 1,100 per cent tax increase in three years ended up “killing” the product in 2007.

Its successor, Viena Ice ready to drink vodka, said Ms Karanja, was suffering a similar fate, having attracted a 70 per cent tax increment over three years. She was addressing the parliamentary committee on the company’s strategy in curbing illicit brews.

“The government, together with relevant stakeholders, should ensure that the low market has variety of choices… A consumer inclined to wine, beer, or spirit should have a preferred choice at an affordable rate, just like preferences within the middle and upper markets,” the company said.

SIMILAR CONCERNS

East African Breweries has also raised similar concerns to Parliament after a 50 per cent excise duty was imposed on its flagship Senator Keg beer, pricing it way above the targeted low end market.

Senator Keg was enjoying a tax-exempt status until last year when the National Treasury imposed a 50 per cent tax, resulting in an increase in retail price and a sharp drop in sales.

The parliamentary budget office last week promised to recommend the reinstatement of excise tax remission on the brand, a move Keroche argues is not sustainable.

“Manufacturers should be enabled to produce alcoholic beverages through a delicate balancing act by taxing products in a manner that leaves them affordable to the target market and still yields revenue,” reads the petition by Keroche.

Related Article: EABL mulls over ditching pocket friendly Senator Keg as tax hits profit

August 19, 2014; http://www.nation.co.ke/business/Keroche-Alcohol-Taxation-Parliament-Petition/-/996/2423400/-/ogmfuw/-/index.html

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