Alcohol manufacturers have opposed the move by the government to force them to pay excise duty in advance, stating it will spur the production of illicit drinks.
The Alcoholic Beverages Association of Kenya (Abak) said compelling legal manufacturers to pay excise duty within 24 hours upon removal of goods from the stockroom is a policy proclamation that will punish innocent players due to failures in managing illicit alcohol.
They said that while the proposal, which was not taken through public participation and was only inserted in the Finance Bill, 2023 by the National Assembly’s Finance Committee, was meant to help prevent the trade of illicit alcohol, it is more likely to end up promoting it.
Abak Chairman Eric Githua said in a statement on Friday that the introduction of the provision was unnecessary as the current model, where manufacturers remit the tax after the reconciliation of sales, is working.
Excise duty is a consumption tax charged at the point of consumption. In the alcohol industry, the product passes through a value chain comprising distributors and outlets before it is consumed.
“Our members have remained compliant in remitting excise duty, playing their part in building Kenya’s economy even in the current tough economic times,” Mr Githua said.
“Implementing the advance payment effectively is a counterproductive, unperceptive move that will hurt legal manufacturers debilitatingly and benefit illicit alcohol dealers who do not pay taxes, anyway.”
The proposal was picked up by the Finance Committee after a submission by the Illicit Alcohol Prevention Taskforce.
Abak argued that the proposal ought to have been subjected to public participation as the law demands that they make major changes to their ways of working, yet it was not in the original Bill.