Drop Proposal To increase Taxes On Alcoholic Beverages

Beer distributors have asked MPs to drop the proposal in the Finance Bill, 2022 to increase taxes for beer, spirits, locally manufactured glass, and alcohol advertisements.

The distributors said increasing the taxes would negatively affect a sector that is barely recovering from the initial ravages wrought by the Covid-19 pandemic, which resulted in bar closures and job losses.

Speaking at a press conference in Nairobi, the distributors also told MPs “it should not be business as usual” as they consider the Finance Bill in their last days before the House adjourns indefinitely ahead of the General Election.

The Bill proposes to increase Excise Duty on beer by 10%, on spirits by 20 percent, and on locally manufactured glass by 25 percent. There is also a proposal to impose a 15 percent Excise Duty on advertisements for alcohol.

“The proposed increase is ill-informed and untimely as it will ultimately increase the cost of doing business for the entire sector and affect the entire supply chain from farmers, transporters, manufacturers, distributors, bottle makers, consumers, and retailers,” said Maina Gikonyo, the Managing Director of Rwathia Distributors.

Accompanied by other distributors from Nairobi, Mr. Gikonyo said the taxes would result in an increase in prices that are likely to drive down demand for legal alcoholic beverages and affect a sector that is yet to recover from the wounds of similar actions in the past.

“In 2015, for example, an ill-advised move to increase tax on sorghum-based beer destroyed a value chain that resulted in the loss of lives and livelihoods. The consumption of illicit alcohol increased so much that the President had to intervene through the establishment of a multi-agency task force,” he added.

The sector is on the recovery path after the damage wrought by the pandemic, the biggest of which was the closure of 8,000 bars and restaurants, resulting in the loss of jobs for 40,000 workers.

The cost of alcoholic beverages has remained the same after the High Court issued orders last year suspending the increase of Excise Duty. That case is scheduled for hearing before Justice Anthony Mrima on Wednesday morning.

The distributors also criticized the tendency of the Government to increase Excise Duty annually via the Finance Bill as well as the annual inflationary adjustment, which effectively means that the tax is increased twice a year. Other players in the alcoholic beverages sector have argued that the annual increases have a negative effect as the contribution of the sector to Excise Duty revenue has dropped over the last five years.

The Finance Bill is currently undergoing scrutiny by the Finance and National Planning Committee of the National Assembly as MPs count down their final month in the House before they break for the campaigns.

Mr. Gikonyo told the MPs: “You are our representatives, and you have the ability, with the stroke of the pen and on the floor of the House, to assert the will of the people you represent on this matter.”

“Save the youth who are going to leave the products we sell to consume sub-standard and dangerous alcohol substitutes. Save the 250,000 jobs of people employed in the retail trade of alcoholic products and creative sectors,” he added.

Read More: If Parliament Cares, The Excise Tax Plan Should Be Killed On Arrival