Alcohol beverage makers oppose excise duty change

Alcoholic beverage manufactures and distributors have opposed the National Treasury’s move to impose an annual excise tax increase pegged on inflation.

The manufacturers and distributors argue the move will drive up the price of alcoholic beverages and push consumers further into illicit consumption of alcohol.

Alcohol Beverages Association of Kenya (ABAK)chairman Gordon Mutugi on Tuesday said the government needed to be more innovative in raising funds to combat production and consumption of counterfeit and illicit brews in the country.

According to the sector lobby group, annual tax changes to products such as alcohol could have an inverse effect, leading to lower sales and revenues generated.

“A more progressive view from industry is that Parliament ought to have enacted legislation that commits at least two percent of the Ksh140 billion excise contribution by alcohol industry towards enforcement by the Kenya Revenue Authority in order to nab counterfeits and illicit brews,” Mr Mutugi said.

During the budget presentation on Thursday, Treasury cabinet secretary Henry Rotich did not disclose much on the proposed changes to excise duty.

In the Finance Bill 2018 tabled in Parliament last week, the treasury is seeking to amend the inflation adjustment on excise duty from every two years to yearly.

The change will also affect the cost of cigarettes, bottled water and fuel.

Mr Mutugi said the move would hit consumers the hardest and drive up the cost of living.

“A fair tax regime should protect consumers, enhance tax compliance, increase tax collection for the government and support business and job creation while ensuring tax compliance by all players. Unfortunately, this cannot be said about annual excise increase as proposed in the Finance Bill 2018,” he said.

Alcoholic beverage manufactures have for years been pushing for a more stable tax system with predictability to support the sector’s growth.

ABAK has at the same time raised concern that an increase in taxes would hamper competitiveness with illicit brews already diverting an estimated Ksh40 billion to the exchequer.