Kenyan manufacturers oppose planned rise in excise tax, express fears it will hurt businesses

KENYA – Kenyans are staring at more costly beer, juice, wine, water, and confectioneries starting next month as the Kenya Revenue Authority (KRA) moves to implement the annual inflation adjustment of excise tax.

The Excise Duty Act 2015 proposes an adjustment in excise duty every year in consideration of the cost of living.

In relation to this, KRA said the Commissioner General will adjust the tax rates on the items using the average inflation rate for the financial year 2021/2022 of six decimal three per centum (6.3 per cent), as determined by the Kenya National Bureau of Statistics.

Other goods to be subjected to the tax increment include fuels and motor vehicles, while services include telephone and internet data services, fees charged for money transfer services, and other fees charged by financial institutions, reports Kenyan Wall Street.

KRA had invited public submissions on the new inflation adjustments to be sent to the Commissioner General by the close of business on Friday, September 16. Once approved, the adjusted specific rates will be effective from October 1.

In response to this, the Kenya Breweries Limited (KBL) has projected a Ksh.588 million hit to the income of sorghum and barley farmers should KRA lift excise duty rates by the stated percentage.

The setback is expected to hit out at an estimated 15,000 farmers as the brewer reduces its uptake raw material used in the manufacture of alcoholic beverages.

KBL for instance relies fully on produce by contracted farmers to run its recently completed Kisumu brewer which primarily manufactures powdered beer which is popularly known as keg.

While re-empting a further loss of nearly Ksh.20 billion to distributors and employment income, KBL wants KRA to implement a moratorium against increasing the current excise tax rates for the 2022/2023 fiscal year, highlights Citizen News.

This in consideration of recent tax increases through the 2022 Finance Act.

“Any increase in tax on alcohol undermines alcohol manufacturers’ capacity for production and distribution of alcohol beverages which supports micro, small and medium enterprises (MSMEs),” stated EABL Group Corporate Relations Director Eric Kiniti on behalf of KBL.

“Holding any excise tax inflationary increase for the next one year will allow manufacturers to focus on confidence and job restoration within the alcohol value chain starting from the farmers.”

KBL joins part of a long cue of industry stakeholders who have opposed the adjustment of the rate of excise duty (on excisable goods) for inflation or 6.3 per cent from October 1, 2022.

Among other opponents to the amendment which remains the subject of public participation includes the Alcoholic Beverages Association of Kenya (ABAK), the Petroleum Institute of East Africa (PIEA), BAT Kenya and Coca Cola.

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