EABL blames erratic tax for its high business costs

Monday, May 08, 2017 — updated on December 26, 2020 - 2 min read

EABL Group chairman Charles Muchene (centre) rings the bell during the listing of the EABL’s final series of its corporate bond at the NSE on May 8, 2017. Looking on is Group MD Andrew Cowan (left) and NSE chief executive Geoffrey Odundo. PHOTO | SALATON NJAU | NMG

By JAMES NGUNJIRI

What you need to know:

Volatile tax is making it difficult for investors to attract long-term capital, according to EABL group chairman Charles Muchene.
Mr Muchene says in the past year, the brewer had a tax increment in excess of 40 per cent on beer and spirits.
The EABL realised a two per cent growth in profit after tax in the half-year ending December 31, 2016 despite significant excise tax increase.

Unpredictable tax rises have escalated East African Breweries Limited’s (EABL) #ticker:EABL cost of doing business and made planning difficult.

EABL group chairman Charles Muchene on Monday said volatile tax is making it difficult for investors to attract long-term capital.

“Investors are looking for a predictable environment so that they can plan. If we have a policy framework which keeps changing every year you cannot make long-term investment decisions,” said Mr Muchene during the EABL bond listing bell-ringing ceremony at the Nairobi Securities Exchange (NSE).

Mr Muchene said in the past year, the brewer had a tax increment in excess of 40 per cent on beer and spirits, posing challenges to the company.

With breweries, distillers, support industries and a distribution network across the region, the EABL is the second largest Kenyan taxpayer remitting more than Sh40 billion in taxes to the exchequer.

During the 2017/2018 fiscal year Budget statement presentation on March 30, Treasury secretary Henry Rotich proposed an increase of tax rate on high-value spirits exceeding 10 per cent alcohol, from Sh175 per litre to Sh200 per litre.

“We are requesting that changes in the future be predictable so that companies can plan along the changes,” said Mr Muchene.

The EABL realised a two per cent growth in profit after tax in the half-year ending December 31, 2016 despite significant excise tax increase.

According to EABL group managing director Andrew Cowan, Kenya contributes more than 70 per cent to the company’s profits and the prevailing tax regime in the region’s biggest economy has significantly affected the earnings. Keroche Breweries is the second largest in Kenya.