KRA cushions Keg consumers from new beer taxes

An EABL senator keg trailer being offloaded at a deport in Meru on March29,2016.People in Meru have resulted in drinking the brand for its safe and cheap to afford.PHOTO PETER MUTHOMI

Consumers of low-cost beer made from sorghum will not be exposed to additional taxes, meaning they will continue enjoying their drink at the prevailing rates.

Top officials of the Kenya Revenue Authority told Weekend Business that the tax breaks granted last year on the low-cost beverage widely known as Keg are still protected. A new provision in the Finance Bill 2016 signed into law had sought to streamline the Excise Duty, creating an impression that the taxes levied on the low-priced beer could be reviewed.

But on Wednesday, Benson Korongo, the KRA Commissioner for Domestic Taxes, said that taxes on Keg were proscribed under the Alcoholic Drinks Control (Amendment) Bill.

“The provisions of remissions for keg beer is provided for in the Excise Duty Act of 2015 and is also provided for in under gazette notice issued by the Cabinet Secretary in the National Treasury and these have not been repealed,” Mr Korongo said.

A half-litre serving of the beer is currently retailing at Sh50, about a third of the recommended price of the most popular regular brands of the same or lower volume. “It means then that the remission then stands,” adds Mr Korongo, calming fears along the entire supply chain of Keg, starting from sorghum farmers to consumers.

All beers except keg attract a duty of Sh100 per litre following amendments introduced last year. The same tax rate applied to sorghum-based beer, whose applicable rate is Sh10 per litre, would more than double its prices.

A review of the taxes payable on the low-priced beer would be certain to increase the price of the drink brewed by East Africa Breweries Limited (EABL), and is popular with low-income earners. Any price adjustments are reflected in a slump in consumption, since low-income earners are often the most price-sensitive. Keg enjoys much lower taxation to promote it as a healthier and safer alternative to illicit alcoholic beverages that claimed hundreds of lives in 2014.

A tax hike of the low-cost beer was introduced in 2013, pushing its price beyond the reach of the intended market. The move had far-reaching implications, beginning from smallholder farms where the raw materials were grown.

President Uhuru Kenyatta signed into law the amendments that set the tax cut on Excise Duty levied on beer made from sorghum or cassava, from 50 per cent to 90 per cent. Following the tax cut, consumption of Keg soared and it became the fastest-selling product for EABL, since most of the illicit spirits were driven out of the market.

Excise Duty, levied on non-essential consumption including beer, mineral water and cigarettes, has been the best-performing revenue stream for KRA since 2003, consistently exceeding targets. KRA expects to collect an additional Sh200 billion over the next five years as duty from excisable goods.