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Alcohol excise tax formula will drive many to illicit drinks, warns brewer
Alcoholic Beverages Association of Kenya Chairman Eric Githua and EABL Group corporate relations director Eric Kiniti during a media briefing on June 04 2024 at Sarova Stanley Hotel.
Photo credit: Francis Nderitu | Nation Media Group
The National Treasury's new excise tax plan for alcoholic products will make them unaffordable to many consumers, manufacturers have cautioned, forcing them to turn to illicit and counterfeit drinks.
Through the Finance Bill, 2024 the National Treasury has proposed a new method of taxing liquor based on alcohol-by-volume (ABV) which will see excise duty paid on some spirits rise by up to 80 percent.
ABV is a metric used to determine the alcohol content in a beverage. The measurement shows what percentage of the beverage’s total volume is pure alcohol.
The shift to ABV was informed by a study that was commissioned by the Treasury and done by the African Economic Research Consortium (AERC), which proposed three choices for the application of ABV.
“The challenge we have is that the number they have picked in the spirits is higher than expected. We are not saying don’t increase taxes, but do it progressively,” said Eric Kiniti, the Corporate Relations Director for the East African Breweries.
Mr Kiniti was speaking at a press conference on Tuesday.
The three choices given by the study were Sh8 per centilitres, Sh12 per centilitres, and Sh16 per centilitres.
“Now, they have picked the Sh16 which is on the higher side. What we are saying, they should have done Sh8 [per centiliters] and progressively moved to Sh16 but for a period of time,” said Mr Kiniti.
The National Treasury has also proposed to disallow local alcohol producers from claiming refunds on excise tax charged on inputs used to make alcohol including ethanol, glass, sugar, and concentrates.
Factoring in both amendments, the recommended retail price of a 250 ml mainstream spirit sold by the EABL, the largest brewer in the region, will increase from Sh300 to Sh770, a move that will push people to illegal drinks.
Brewers currently pay an excise duty of Sh356 for a litre, but with the shift to ABV, they will now pay Sh1,600 per litre for the tax which is popularly known as the sin tax.
Erick Githua, the chairperson of the Alcoholic Beverages Association of Kenya (Abak) noted the proposals go against the East African Community (EAC) stage meant to harmonize excise taxes among the seven countries.
