Raising alcohol taxes will boost illicit brews, say bar owners

Increasing taxes on alcohol will promote production and consumption of illicit brews, stakeholders in hospitality and entertainment have said.

Their concerns come after the government announced plans to increase prices of certain alcoholic products through raising tax by 6.3 per cent.

The Kenya Revenue Authority is already in the process of collecting public views on the proposed implementation of the inflation adjustment.

KRA argues that the 6.3 per cent will enable it address the average inflation rate recorded in the 2021-2022 financial year and cushion the government’s revenues from getting eroded.

Some of the products that are targeted for price increase are beer, bottled water, cider, fruit juices, berry and other fermented drinks.

But on Friday, the Homa Bay branch of National Bar Owners Association (BAHLITA) joined their colleagues to oppose the tax increase plan, saying Kenyans will not afford drinks manufactured by firms like Kenya Breweries.

Through their chairman Stephen Odongo, the stakeholders who included farmers Octave Ayieko, Charles Otieno and Mary Odero expressed concerns that people will resort to chang'aa, kangara and second generation alcohol, which are outlawed in the country.

 “Trade in contraband goods, which are smuggled into country, is likely to increase and deny government needed revenues. The government should work with what stakeholders are saying,” Odongo said.

Prices of the brands of alcohol may be hiked should the proposed increase on excise duty sail through.

Odongo argued that already there is an outcry that the proposed taxes will affect the hotel and entertainment industries, which partly depend on sale of alcoholic drinks for profit.

“There is a high possibility that many youths who are our customers will go back and start consuming alcohol brewed at illegal chang’aa dens,” he added.

They said the hospitality industry is still suffering from the effects of Covid-19, and the government should not add more pressure to their customers who are struggling to adjust due to high cost of living.

Odongo said bar owners have already reported decline in sales after clients heard about possible increase in prices of alcoholic drinks.

Through the Finance Act in July 2022, the government had proposed to increase excise duty on beer and spirits.

Odongo said their businesses are already suffering from the taxation, which is transferred to consumers. Some businesses have recorded a decline of between 21 and 32 percent in barley and sorghum-based beers.

“There is a need to give time to investors in the bar and restaurant industry to recover from the effects of Covid-19,” he said. 

Farmers Ayieko and Odero said high tax on alcohol have adverse effects on production of sorghum and barley. The crop is a major raw material in making beer.

“We are likely to get stranded with our produce,” Ayieko said.

Odero aid asked MPs to intervene in the matter, saying they can pass a legislation that will promote the business on alcoholic drinks.

“We’re asking President William Ruto to intervene,” she said.

Edited by Henry Makori