Freeze new excise duty on beer, plead dealers

Beer distributors tell KRA to reconsider looming tax increase

What you need to know:

  • KRA in August said it would increase excise tax on alcohol using inflation rate figures from financial year 2019/2020.
  • They said reopening the economy with increased alcohol prices would be counterproductive to KRA's aim of increasing revenue collection.

Beer distributors want a planned increase of excise duty on 31 products suspended to support revival of liquor-related businesses now counting losses since Covid-19 struck.

They said a directive to close bars had seen sales fall by 39 percent where business worth Sh21 billion has been lost since March forcing them to lay off workers.

KRA in August said it would increase excise tax on alcohol using inflation rate figures from financial year 2019/2020.

Speaking in Nairobi on Friday, the distributors’ representatives Esther Muthoni and Mr Maina Gikonyo said their investments had been whittled down with most facing economic hardships aggravated by inability to meet loan demands.

“With infections falling, we are optimistic that bars will be re-opened under strict anti-Covid protocols. 

“Our market has witnessed a downturn with about 13,500 pubs permanently closing for inability to pay rent and employee salaries,” said Ms Muthoni.

Dire straits

Representatives of more than 70 alcohol distributors in the country said the fall in revenue collected from excise duty on alcohol by 17 percent before Covid-19, highlights the dire straits the sector has been in from a struggling economy.

"Already, 30 percent of the bars that were operating before Covid-19 will not be reopening as they constitute the businesses that have collapsed due to the general effect on businesses brought on by the pandemic and the measures to limit its spread," said Muthoni who is a director at alcohol distributor Jukoma Enterprise.

Last week, the government picked popular city clubs Sabina Joy and Green Club as pilots to assess social distancing rules as a step towards reopening of bars.

Operators, however, want the government to expedite the process of their reopening and restaurants to revive the sector.

Reopening economy

They said reopening the economy with increased alcohol prices would be counterproductive to KRA's aim of increasing revenue collection.

They also pointed to South Africa as a good example of how to save the sector amid strict alcohol restrictions.

The southern Africa nation cushioned the alcoholic beverages sector by holding taxes and deferring the payment of excise duty to boost the troubled sector.

"We are looking forward to a resumption of business soon.  If the government is of the view that infection rates have declined well enough, but we are concerned that the sector will face difficulties getting back on its feet if the increased taxes kick in at the same time," said Gikonyo, a director at beer distributor Rwathia.

The suppliers who handle Kenya Breweries Limited and UDV (Kenya) products said they expected an extremely slow recovery period as Covid-19 guidelines requires all pubs to curtail the number of patrons at any particular time.

Welcome!

You're all set to enjoy unlimited Prime content.