Farmers Most Affected by the FY 2022/2023 Excise Duty on Beer

By Korir Isaac / Published May 16, 2022 | 3:37 pm




KEY POINTS

The parliament should reconsider the 2022/2023 budget by engaging all stakeholders, farmers, citizens, and the business community before approving it.


Farmers excise duty

KEY TAKEAWAYS


We should focus more on lowering the cost of living and ensuring that farmers continue to sustain Kenya’s economy amidst the global supply disruptions profitably.


On April 7, 2022, the Cabinet Secretary for the National Treasury and Planning submitted before the National Assembly the Budget highlights and revenue-raising measures for the FY 2022/2023. The 3.3 trillion budget, despite its focus to accelerate economic recovery for improved livelihoods, will greatly affect farmers, the alcohol industry, among other sectors.

Although the intention is good, the budget proposal elicited a cause for concern among many financial experts. This is especially so given the prevailing economic situation in the country. Kenya’s economy is characterized by increased and rising living costs where households are almost unable to afford essential commodities. Unemployment, an elevated trade deficit, and public debt burden are other issues the country is grappling under.

Despite the budget themed ‘accelerating economic recovery for improved livelihood,’ some of the proposals it contains are set to achieve the opposite, by increasing the cost of various commodities and, as a result, reversing our economic recovery and growth plans.

They will further strain the already struggling households, not to mention the manufacturing sector. A good example is the excise duty imposed on items such as cosmetics, bottled water, juices, motorcycles, alcoholic drinks, and tobacco products, to name a few.

The excise duty on alcohol, for instance, was maliciously proposed with an intent to punish the sector seemingly. In the new budget proposal for the FY 2022/2023, the excise duty for beer was increased by 10 percent, from 121.85 shillings to 134 shillings. It was increased by 20 percent for spirits, from 278.7 shillings to 335.3 shillings.

And this is not to mention the excise duty on fees charged for the advertisement of alcoholic beverages, betting and gaming activities, which was increased by 15 percent.

In a nutshell, this excise duty is punitive given that the producers of excisable goods were adversely impacted by Covid-19 and are yet to recover fully. Furthermore, those who will bear the biggest grunt are the farmers who produce raw materials for these industries. The tax policy measures will significantly impact them. Already, barley farmers have been forced to reduce their production to avoid losses.

According to stats from the Kenya National Bureau of Statistics (KNBS), Kenya has experienced a 6.5 percent decline in barley production over the last decade, affecting farmers in Narok, Meru, Uasin Gishu and Nakuru counties.

The situation is bound to get worse. The proposed excise tax increase will reduce barley production by 5,200 tons, an equivalent of a 1.2-billion-shilling loss in income for farmers.

ALSO READ: Kenya to import maize outside EAC as flour prices surge

Similarly, perennial excise duty increases negatively impact barley production and other sources of grains used in making beer. Sorghum grain produced by 47,000 farmers in 21 counties in Kenya will also be affected. The proposed increase in duty rates is projected to reduce sorghum production by 3200 tonnes translating to a loss of 0.6 billion shillings in income for farmers in the coming year.

Increasing excise duty rates on beer will reduce the industry’s ability to cushion farmers from the increased cost of farm inputs. The industry recently increased the price of barley and sorghum by 23 percent and 14 percent, respectively.

And with beer being the biggest consumer of barley and sorghum, its production will significantly reduce. The supply will drop, and with the high demand, its prices will increase.

As beer becomes unaffordable and out of reach for most consumers, illicit alcohol will continue being the preferred alternative. This already has increased costs to the government in terms of enforcement, lost excise tax revenue (estimated at 78.4 billion shillings), and increased mortality and health cost related to the consumption of illicit alcohol.

Clearly, these negative implications deserve that the government reconsiders its position on certain aspects of the 2022/2023 budget. The country and its people are already reeling from inflation and the fall-out of the conflict in Russia-Ukraine.

Now is the time to tighten the belt across all sectors, including the government and its insatiable appetite for foreign debt. The parliament should reconsider the 2022/2023 budget by engaging all stakeholders, farmers, citizens, and the business community before approving it. We should focus more on lowering the cost of living and ensuring that farmers continue to sustain Kenya’s economy amidst the global supply disruptions profitably.




About Korir Isaac

A creative, tenacious, and passionate journalist with impeccable ethics and a nose for anticipated and spontaneous news. He may not say it, but he sure can make one hell of a story.

View other posts by Korir Isaac


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