Pub owners want ‘sin tax’ extended to supermarkets

Pub and restaurant owners are seeking to have the tax-net on alcohol widened to include supermarkets and small and medium sized bars which are currently exempted from the catering levy.

They say competition would be there even if all businesses dealing in alcohol, but which were exempted from taxation were roped in.

“Currently, about one third of all establishments that sell beer numbering 30,000 (based on East African Breweries figures) pay VAT & Catering Levy,” says a budget proposal prepared by the Pubs, Entertainment and Restaurant Association of Kenya (Perak).

Supermarkets have evaded paying catering levies for alcohol since by law they are not considered either bars or hotels. This allows them to sell alcohol at cheaper prices than bars and hotels.

Small and medium sized bars and hotels have also been evading paying the two per cent catering levy since their daily gross sales are below the Sh8,300 required by law for them to pay the catering levy.

Perak is also seeking to have alcohol selling facilities that have been evading paying the 16 per cent VAT since they are far below the Sh5 million turnover threshold to be incorporated.

“Anyone who sells even one bottle of alcohol should be subject to the ‘sin or luxury Taxes’ of VAT and Catering Levy,” said Mr Sam Ikwae, Perak’s chief executive.

To help implement the proposals, the players recommend changing legislation so as to compel all businesses that sell alcohol to register with an industry association before they can get liquor licenses.

“The government is pressed in capacity and cannot adequately check if everyone pays taxes. If it is made mandatory to join an association then we can help to ensure that members comply with necessary taxation before we register them,” said Mr Ikwae.

To ensure full compliance the industry players propose stiff penalties for those who do not conform. The industry is also seeking to have a bigger say in the utilisation of funds collected through the catering levy.

The stakeholders proposed that the resulting increase in Catering Levy revenues be used to boost the marketing kitty for Kenya’s tourism.

This will involve changing the emphasis of Catering Levy which is currently used to boost training for the tourism industry.

“This can be achieved through significant increases in funds available to market Kenyan tourism domestically, regionally and internationally,” said the proposal.

To cushion businesses brought into the VAT and Catering Levy net, the tourism stakeholders propose that the VAT levied on the hospitality industry be reduced from 16 per cent to 10.

This would be seen as a direct way for the government to give an incentive to hotels and restaurants to rejuvenate their operations and improve the quality of tourism facilities.