Kenyan manufacturers fault 15% duty hike on alcoholic drinks

KENYA – Manufacturers and distributors of alcoholic beverages have opposed the 15 percent increase in excise duty on wines and spirits in this year’s budget saying it is detrimental to the industry’s growth.

The Alcoholic Beverages Association of Kenya (ABAK) said in a statement that the tax hikes would leave legitimate players in the industry under uncertainty in their investments and business planning.

In addition to the 15 percent hike, the excise is also due to be adjusted upwards in line with inflation at the beginning of the next fiscal year.

The proposal by the National Treasury Cabinet Secretary, Henry Rotich, also reverses the desired sense of predictability in taxation for the industry that came about with the introduction of the inflationary adjustment via the Excise Duty Act.

The Treasury introduced changes to the law, and Excise Duty allowing for reviewing on an annua basis, with the rate pegged to the average rate of inflation for the past year.

According to a local media house, Mr Rotich said the higher excise was necessary in order to address the fall in excise revenue as a percentage of GDP, but the manufacturers dismissed treasury’s move saying it would alter the taxation regime in the sector.

“The proposal by the Cabinet Secretary also reverses the desired sense of predictability in taxation for the industry that came about with the introduction of the inflationary adjustment via the Excise Duty Act, 2015,” said Abak Chairman Gordon Mutugi in a statement.

Following the upward review of the tax, the duty on a 750ml bottle of wine will now jump by Sh18 (US$0.18) to Sh136 (US$1.36), while a 750ml bottle of whisky will rise by Sh24 to Sh182 (US$1.82).

The lobby urged the treasury to provide clarity on the publication in the Kenya Gazette of the inflation adjustment due from July this year.

“As has been noted before, the approach to regulation of alcohol in Kenya needs to be driven more towards direct interventions and to deal with alcohol-related problems, rather than the current population-driven approach,” said Mr Mutugi.

Kenya Breweries Limited managing director, Jane Karuku, also said that the increase would also dilute the countries efforts in fighting illicit brews as it would false consumes into cheaper alternatives.

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