Manufacturers fault duty hike on alcoholic drinks

Manufacturers say the tax hike will drive drinkers to cheaper but dangerous alternatives. [Denish Ochieng, Standard]

Manufacturers and distributors of alcoholic beverages have protested the hike in excise duty on wines and spirits by 15 per cent in this year’s budget.

Under the aegis of the Alcoholic Beverages Association of Kenya (Abak), they said the move would not only curtail the industry’s growth but would also reverse the gains made in the fight against illicit brews.

The proposal by the 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, 2015.

National Treasury Cabinet Secretary  in his budget speech last week said the excise tax would also be adjusted upwards in line with inflation at the beginning of the next fiscal year.

Rotich in justifying the tax hike said it would address the fall in excise revenue as a percentage of GDP.

The tax fell from three per cent in 2004 to two per cent in the 2017/18 fiscal year.

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.

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Following the upward review of the tax, the duty on a 750ml bottle of wine will now jump by Sh18 to Sh136, with that on a 750ml bottle of whisky rising by Sh24 to Sh182.

The lobby urged Rotich 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.

As part of Treasury’s efforts to widen the tax bracket so as to plug a widening budget deficit, Rotich at the same time raised the excise duty on cigarettes by 15 per cent.

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alcoholic beveragesAlcoholic Beverages Association of KenyaTreasury