Eyeing Sh111bn more from alcoholic beverages, cigarettes tax


 Collection of alcoholic beverages.  

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After a break in 2023, the Treasury has in this year’s budget hit alcoholic beverages and cigarettes with an excise duty increase.

The higher excise on spirits and tobacco products is part of the government’s effort to raise the collection from excise taxes by Sh111 billion to Sh401.1 billion in the 2024/2025 fiscal year from a projected Sh290.1 billion in the current year.

Excise on alcoholic beverages will now be levied depending on alcohol content—also known as alcohol by volume (ABV)— departing from the present method where a specific tax is levied depending on the type of beverage.

In the Finance Bill 2024, beer of alcohol content below six percent and wine will be levied at Sh22.50 per decilitre (10ml) of pure alcohol, while spirits will be levied Sh16 per decilitre of alcohol content.

Under current laws, excise on beer is charged at Sh142.44 per litre, wine at Sh243.43 and spirits at Sh356.42.

The new method will raise excise on spirits up to Sh720 per litre and wine to Sh270. For beer, the excise on the brands with low ABV (at 4.2 percent) will drop to Sh94.50, while those with higher content of up to 7.5 percent will see excise go up to Sh168.74.

Alcoholic beverage manufacturers told MPs in their submissions that the higher taxes will push more drinkers to illicit brews, therefore defeating the government’s aim of raising more revenue.

On cigarettes, manufacturers said the increase in tax will encourage illicit imports. The Bill is raising the tax on mille (1,000 sticks) of filtered cigarettes to Sh4,100 from Sh4,067.03, translating to an excise increase from Sh4.07 per cigarette to Sh4.10.

On unfiltered sticks, the excise is going up to Sh2,926.41 per mille or Sh2.96 per stick to Sh4,100 per mille, or Sh4.10 per cigarette.

The sin tax raise has been extended to betting and gaming, where excise on stakes wagered is proposed to go up to 20 percent from 12.5 percent. The Bill is also removing the exemption of betting, gaming and lottery from VAT.

The higher tax, aside from raising more revenue, is also expected to discourage gambling, which has grown to become a social problem in Kenya, especially among the youth.

Betting firms told MPs that the tax changes risk triggering the disappearance of 80 percent of all sportsbook bets in the Kenyan market, and potentially collapsing the industry in Kenya.

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Note: The results are not exact but very close to the actual.