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Kenya’s Tax Collector Urged to Reconsider Increasing Tax on Alcohol

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Beer distributors have asked the Kenya Revenue Authority and the National Treasury to reconsider a proposal to increase the tax on alcoholic beverages starting next month to cater for inflation.

They said the increase would worsen the situation for the alcoholic beverages sector, which has suffered a slump because of the restrictions on social gatherings imposed to limit the spread of Covid-19.

Speaking at a press conference in Nairobi, representatives of the more than 70 alcohol distributors in the country said a tax increase for the sector would result in more losses at a time the sector is on its knees.

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“We are looking forward to a resumption of business soon, if the Government is of the view that the infection rates have declined well enough, but we are concerned that the sector will face difficulties getting back on its feet if the increased taxes kick in at the same time,” said Maina Gikonyo.

Alcoholic beverages are among the 31 excisable goods whose prices would automatically increase once Excise Duty is increased. The others include fuel, bottled water and juice.

The beer distributors said more than 100,000 jobs in the sector have been lost, close to 400,000 livelihoods negatively affected and the entire alcoholic beverages industry value chain has lost more than KSh38 billion in the last five months.

“Already, 30 percent (that’s about 13,500 outlets) of the bars that were operating before Covid-19 will not be reopening as they constitute the businesses that have collapsed due to the general effect on businesses brought on by the pandemic and the measures to limit its spread,” said Esther Muthoni.

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Every distributor employs about 20 people on average –  drivers, loaders, accountants, and clerks, and supports auxiliary businesses – and supplies 680 bars, restaurants and wines and spirits shops. Each bar is estimated to employ an average of five people.

Bars and restaurants were ordered closed in late March this year and restaurants had initially been allowed to sell alcohol with food after meeting strict Ministry of Health protocols but have been closed for the last 60 days since 27th July as the Government escalated measures to limit the spread of the novel coronavirus.

The distributors said allowing the sale of alcohol would give them an opportunity to get back on track “but reopening with an increase in prices will do more harm than good and hurt the objectives the revenue authority and the National Treasury had in the first place.”

They urged the Government to follow the example set by South Africa, which had some of the strictest restrictions on alcohol but has cushioned the sector in the form of holding taxes and deferring the payment of excise taxes.

KRA has asked for input from interested parties ahead of the annual increase set to take effect from October 1 and has insisted on the fact that it merely implements the law and is not a policymaker.

The National Assembly changed the Excise Duty Act via this year’s Finance Act to make it mandatory for the KRA to consult the National Treasury and stakeholders before effecting the inflationary adjustment for Excise Duty.

“Increasing the Excise Duty rate would be out of tune with the pain and the challenges the sector has faced over the past six months and in the circumstances, the Kenya Revenue Authority and the National Treasury ought to reconsider,” said Maina Gikonyo.

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