The Alcoholic Beverages Association of Kenya (ABAK) has objected to the government’s proposal of raising the cost of excise stamps, stating that it will adversely affect their business and may lead more Kenyans to consume illicit alcohol.
The Kenya Revenue Authority (KRA) had proposed revising the Excise Stamps Regulations, 201,7 by introducing the Excise Duty (Amendment) Regulations, 2023. The aim is to enhance the revenue collection, and part of the plan includes new pricing for duty stamps. Under the proposed regulations, wine and spirits will see a 79% rise in stamp costs, from KES 2.80 to KES 5, while beer and cider will face a 100% increase, from KES 1.50 to KES 3.
ABAK Chairman Eric Githua stated that the proposal to increase the excise stamps on alcoholic beverages is inappropriate in the country’s current harsh economic climate. He also pointed out that this proposal contradicts the original purpose of the excise duty stamp, which was to enhance revenue collection by tackling the issue of illegal trade and improving the trackability of products.
The Association has requested the National Treasury and KRA to drop the idea of excise stamp review, as it would be unfair to manufacturers and distributors of alcoholic beverages, especially since they were only recently subjected to an increase in excise duty in October 2022 due to inflation.
Additionally, the Association expressed concern that the rise in excise stamps would push legal alcohol out of the reach of some consumers, resulting in Kenya being viewed as an unappealing business destination, leading to a decrease in revenue.
ABAK has also observed that the current high taxes on alcohol products have resulted in a reduction in legitimate alcohol sales and an increase in illicit alcohol -The World Health Organization has reported that 44% of all alcohol sold in Kenya is illegal.
Furthermore, ABAK indicated that while the Excisable Goods Management System was created to address counterfeits and enhance product traceability, it has not been successful since KRA continues to battle the problem of fake excise stamps.
There’s an increase in the number of products seized having fake stamps with a spike recorded in the months of November and December 2022.
ABAK
Consequently, the Association proposed that the government modify its strategy for combating counterfeits through excise duty stamps. In light of technological advancements, ABAK sees no rationale for KRA to maintain its current paper stamps and encourages the adoption of digital stamps.
Furthermore, ABAK urges the government to suspend the implementation of new regulations and evaluate the present Excise Duty and administrative system compared to other East African nations. This move would lower the cost of production and compliance for manufacturers, thereby reducing the risk of exposing Kenyans to illicit alcohol.
ABAK’s submission coincided with the Kenya Revenue Authority’s extension of the deadline for feedback on the Draft Excise Duty Stamps Amendment Regulations 2023 to February 21 from February 3.
Read Also: Treasury Unveils Plans to Increase Excise Stamp Fees
