Silence on sin taxes leaves firms guessing next move
The keg line at the EABL plant in Ruaraka, Nairobi. East Africa Breweries Limited has reported an 11 per cent increase in half year profits for the period through December 31st. FILEPHOTO | NATION MEDIA GROUP
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Treasury Secretary Henry Rotich avoided the mention of any sin tax increases in his Budget speech Thursday, leaving manufacturers and consumers of wine, beer, spirits and tobacco products speculating his real intentions.
Mr Rotich only said that he will be drafting a new a stand-alone excise law to modernise and simplify Kenya’s sin tax regulations.
Failure by the Treasury to make excise tax changes brings to naught the jostling and lobbying by beer and tobacco firms which were seeking tax concessions for their products.
Cigarette maker BAT and beer producers Keroche and EABL were on Thursday left guessing what could be up the government’s sleeve, as Treasury Secretary Henry Rotich failed to announce any changes in “sin taxes” but alluded to impending amendments to the Excise Tax Act.
Mr Rotich avoided the mention of any sin tax increases in his Budget speech Thursday, leaving manufacturers and consumers of wine, beer, spirits and tobacco products speculating his real intentions.
Mr Rotich only said that he will be drafting a new a stand-alone excise law to modernise and simplify Kenya’s sin tax regulations.
“The new Excise Duty Bill will be a simple and modern Bill, incorporating international best practices. The Bill will be tabled in Parliament after going through public participation as required by the Constitution,” Mr Rotich told MPs on Thursday.
Failure by the Treasury to make excise tax changes brings to naught the jostling and lobbying by beer and tobacco firms which were seeking tax concessions for their products.
Last year, Mr Rotich introduced excise duty on the mass-market targeted beer at the rate of 50 per cent or Sh35 per litre, leading to doubling of Senator Keg’s prices and sales dipping by more than 80 per cent.
Keroche Breweries was also lobbying the Treasury to cut excise duty on its range of ready-to-drink vodkas such as Viena Ice which is also targeted at the low end of the market.
“The government should have lowered taxes on alcohol especially those targeting the lower market such as ready to drink vodkas,” said Tabitha Karanja, chief executive at Keroche Breweries.
“When the poor cannot afford, they will resort to drinking illicit, home-made brews which are unhealthy and don’t pay taxes.”
British American Tobacco (BAT) Kenya and rival Mastermind Tobacco have also locked horns over how excise tax on cigarettes should be levied, with the latter pushing for a return to a tier system based on the type of cigarette.
Mastermind Tobacco argues that the unitary excise tax regime on cigarettes adopted by Kenya in 2011 has led to prices of low-end cigarette brands go up by as much as 70 per cent, pushing smokers to look for cheaper but health risky options such as illicit and self-rolled cigarettes.
Kenya previously had a four-tier excise tax regime based on the retail selling price (RSP) of different cigarette brands where plain cigarettes were charged Sh14 per packet of 20 sticks and high-end brands levied at Sh70 per packet.
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