KENYA – East African Breweries Limited (EABL) will have to apply to the Treasury for excise tax remission on its Senator beer following removal of the rebate through amendments in the Finance Act 2016.
The tax cut, which stood at 90 per cent, was eliminated after Section 68 A of the Alcoholic Drinks Control (Amendment) Act 2015 which provided for it was repealed.
A Treasury official told the Business Daily that the beer manufacturer now has to apply for the remission, which can be granted under the Excise Duty Act 2015.
He added that the Alcoholic and Excise laws both gave the Finance minister powers to offer the tax cut, with the former having operationalised the provision.
Removal of the remission from the Alcoholic law is meant to correct an anomaly since it is not a tax law and the levy needed to be addressed under the excise law, he said.
The Treasury will have the leeway to set any rate it wants in reinstating the remission.
Protection from paying the full excise tax of Sh100 per litre on beer is important for the commercial viability of Senator, which targets price-sensitive low-income earners.
If the remission is not reinstated, the price of Senator is expected to rise sharply offering price advantage to illicit liquor it was meant to fight.
The Nairobi Securities Exchange-listed beer maker says it is still awaiting the Treasury’s word on the matter.
“We are awaiting the Cabinet Secretary to publish the Gazette, which will guide us on how to make the application.
We are hopeful for a positive outcome, as this will reassure the over 30,000 farmers we are already working with and support ongoing partnerships with the Government and other stakeholders, to boost production of agricultural commodities such as sorghum, millet and cassava in Kenya,” said EABL in a statement.
The recommended resale price of a 300ml mug to the final consumer, currently retailing at between Sh25 and Sh30, will rise to between Sh48 and Sh57 according to tax associate at KPMG Kenya Caleb Mokaya.
A 500ml mug, whose recommended resale price stands at between Sh40 and Sh50, will likely retail at between Sh76 to Sh95, he added.
The repealed law previously granted the remission of excise duty at the rate of 90 per cent on beer made from sorghum, millet or cassava grown in Kenya.
EABL is the only brewer to have qualified for the tax incentive by complying with several conditions including production of beer that has at least 75 per cent content of local raw materials.
The law also required the beer to be packed in pasteurised containers of at least 30 litres, with EABL using the metallic barrel popularly known as keg.
The beer brand was launched in November 2004 when it was granted an excise tax remission at the rate of 30 per cent and which was raised to 42 per cent the next year after it was widely accepted among its target customers.