Treasury eyes revenues from rising spirits sales
The government has once again turned to cigarette and alcoholic drinks manufactures to cough up more money to finance the budget.
The treasury has often turned to what has been aptly described as sin tax, to help the Kenya Revenue Authority (KRA) inch closer to its Sh1.7 trillion revenue target in the next financial year.
Treasury Cabinet Secretary Henry Rotich announced introduced the tax rate for spirits from Sh175 per liter to Sh200 per liter.
The move comes at a time consumption of spirits in the country has been on the rise, offering the government a low hanging fruit from where to raise revenues.
“The consumption of high value spirits has increased tremendously. Accordingly, I also propose to increase the tax rate of spirits from Sh175 per liter to Sh200 per liter,” Mr Rotich said while delivering his speech in parliament on Thursday.
While the National Treasury did not introduce new taxes on beer, it plans to introduce an inflation adjustment that will drive up the cost.
“KRA will publish the new inflation adjusted tax rate for all excisable goods shortly,” he said.
East African Breweries Limited (EABL) which announced a Sh5.6 billion half year net profit in January indicated that beer sales were on the decline, dropping by 13 percent in the six months.
The listed brewer questioned the government’s decision to adjust upwards excise duty on alcoholic drinks which it said was leading to lower consumption.
Treasury however introduced an 80 percent remission for beers made from cassava, sorghum and millet.
EABL produces the Senator Keg brand from the raw materials offering an alternative to illicit brews.
The Treasury also sought to simplify taxation for cigarette manufactures by introducing a two tier structure that will see cigarettes with filters charged Sh2,500 per mille while those without will be charged at Sh1,800.
“This tax measure will ensure equity and fairness in the tobacco industry and prevent job losses in this sector,” the CS said.
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