The Treasury has proposed to cut excise duty remission on millet, sorghum and cassava by 20 percentage points in the latest blow to beermakers already smarting from Covid-19 containment measures.
The reduction in the rate of excise duty that is forgiven (remission) from 80 to 60 percent, implies consumers will be asked to pay more for the low-end beers meant for a price-sensitive market segment.
The remission was reintroduced in 2017 at 80 percent after having been scrapped in June 2016 when the rate stood at 90 percent. The reintroduction was to give farmers a ready market for the produce used in the manufacturing of alcohol and serve as a measure to reduce poverty.
“In exercise of the powers conferred by section 7 (2) of the Excise Duty Act, 2015, the Cabinet Secretary for the National Treasury and Planning makes the following regulations: … Regulation 2 of the Excise Duty (Remission of Excise Duty) Regulations, 2017 is amended by deleting the words “eighty per cent” appearing in paragraph (1) and substituting therefor the words “sixty per cent,”’ Treasury Cabinet secretary Ukur Yatani said in a notice dated April 30 but just released.
The move comes as yet another blow to brewers who have seen the outlets of their products shutdown in public health measures against Covid-19.
When the Treasury reintroduced the remission in 2017, financial and tax advisory firm Deloitte Consulting noted that it was “a welcome move in line with the government’s intention to discourage the consumption of illicit brew by making locally produced beer cheaper and more affordable to low-income earners.
“In addition, this measure aims to provide a ready market for farmers of agricultural produce used in the manufacture of beer. The remission has been extended to cover other agricultural produce other than sorghum, millet or cassava, which were covered under the revoked regulations.”
The Treasury has published the new regulations as part of seeking comments from the public on the proposed change before enacting it into law.
A manufacturer has to make an application to be considered for the remission for the various agricultural produce except for the case of barley. That is to say, full duty has to be paid in the case of barley.
Early this year the Treasury clarified that not every manufacturer would benefit from the duty remission but only those whose alcoholic plants amount to an investment of no less than Sh5 billion. The remission would be for five years from the date of commencement of operations of the manufacturer.