Beer distributors have asked MPs to drop the proposal in the Finance Bill 2022 to increase taxes on beer, spirits, locally manufactured glass and alcohol advertisements. The distributors say higher taxes would negatively affect a sector that is barely recovering from the initial ravages caused by Covid-19, which resulted in bar closures and job losses.
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The Bill proposes to increase Excise Duty on beer by 10%, on spirits by 20% and on locally manufactured glass by 25%. There is also a proposal to impose 15% Excise Duty on advertisements for alcohol.
Speaking at a press conference in Nairobi, the distributors also told MPs “it should not be business as usual” as they consider the Finance Bill in their last days before the House adjourns indefinitely ahead of the General Election. The Finance Bill is undergoing scrutiny by the Finance and National Planning Committee of the National Assembly.
“The proposed increase is ill-informed and untimely as it will ultimately increase the cost of doing business for the sector and affect the entire supply chain from farmers, transporters, manufacturers, distributors, bottle makers, consumers and retailers,” said Mr Maina Gikonyo, the Managing Director of Rwathia Distributors.
Mr Gikonyo said the taxes would result in an increase in prices that are likely to drive down demand for legal alcoholic beverages and affect a sector that is yet to recover from the wounds of similar actions in the past. “In 2015, for example, an ill-advised move to increase tax on sorghum-based beer destroyed a value chain that resulted in the loss of lives and livelihoods. The consumption of illicit alcohol increased so much that the President had to intervene through the establishment of a multi-agency task force,” he added.
The sector is on the recovery path after the damage wrought by the pandemic, the biggest of which was the closure of 8,000 bars and restaurants, resulting in loss of jobs for 40,000 workers.
The cost of alcoholic beverages has remained the same after the High Court issued orders last year suspending the increase of Excise Duty. That case is scheduled for hearing before Justice Anthony Mrima today morning.
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The distributors also criticized the tendency by the Government to increase Excise Duty annually via the Finance Bill as well as the annual inflationary adjustment, which effectively means that the tax is increased twice a year. Other players in the alcoholic beverages sector have argued that the annual increases have a negative effect as the contribution of the sector to Excise Duty revenue has dropped over the last five years.
“You are our representatives, and you have the ability, with the stroke of the pen and on the floor of the House, to assert the will of the people you represent on this matter,” Mr Gikonyo implored MPs. “Save the youth who are going to leave the products we sell to consume sub-standard and dangerous alcohol substitutes. Save the 250,000 jobs of people employed in the retail trade of alcoholic products and creative sectors.”
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