Manufacturers and distributors of alcoholic beverages in Kenya remain opposed the proposed price increase of Excise Duty stamps.
The draft proposal published on January 17 by the Kenya Revenue Authority (KRA) would see wine and spirits face a 79 per cent increase in the cost of stamps from the previous Sh2.80 to Sh5.
Beer and cider also face a 100 per cent increase from Sh1.50 to Sh3 while other products like spirits with strength not exceeding six per cent would also be affected.
Speaking at a media briefing in Nairobi, Alcoholic Beverages Association of Kenya (ABAK) chairman, Eric Githua said they are categorically against the move by the government to review the rates.
“As much as the government is seeking to squeeze more revenues from sin tax to fund its budget, the proposal is ill-timed given the current economic conditions in the country,” Githua said.
He further noted that the proposal goes against the original intention of the Excise Duty stamp whose intention was improving revenue collection by addressing the challenges of illicit trade and increasing the traceability of products.
They said the increase comes barely five months after the increase in Excise Duty for inflation in October 2022 and an earlier increase in July 2022 after changes in the Finance Act 2022.
“Given that Excise Duty was increased three times over the last 14 months, increasing the price of stamps would not only be unreasonable but unfair to manufacturers and distributors of alcoholic beverages,” he said.
Githua said increasing the Excise Duty does not only affect consumers but makes Kenya an unattractive business destination.
The lobby group said compared to other regions in Africa with higher GDP per capita, Kenya has the highest excise tax.
At present, excise tax on beer is Sh142 per litre while an equivalent in Tanzania, Uganda, Nigeria, South Africa and Cameroon; the same is at Sh36, Sh19.5, Sh10, Sh33 and Sh62 respectively. The same trend applies on wines and spirits.
The lobby said high taxation leads to an increase in illicit and counterfeit alcohol.
According to World Health Organisation (WHO), currently, about 44 per cent of total alcohol sold in Kenya is illicit.
This as the taxman continues to grapple with the challenge of counterfeit excise stamps by manufacturers who are looking to cut costs.
There has been an increase in the number of products seized with fake stamps with a spike recorded in the months of November and December 2022.
Production of illicit alcoholic beverages from illegally obtained ethanol is also on the rise with Kenya recording loses of about $259.4 million in revenue every year.
