Treasury CS proposed the amendment to the excise duty that will see an increase in excise duty on alcoholic products. The bill seeks a reduction of the threshold for alcohol strength from over 10% to 8% in beer and spirits.
This implies that more alcoholic drinks of these categories will be covered, thereby expanding the tax base and raising additional revenue. The bill covers beer and mixtures of fermented beverages with non-alcoholic beverages, spirituous beverages, spirits and liqueurs of alcoholic strength exceeding 8%.
Analysts from KPMG says that the implication is increase in the products subject to excise duty by bringing into the tax bracket products with low alcoholic content that were previously not taxed.
In this case, spirituous beverages of alcoholic strength exceeding 8% will be subject to excise duty of KSh 110.62 while Un-denatured ethyl alcohol, spirits liqueurs and other spirituous beverages of alcoholic strength exceeding 8% will be subject to excise duty of K253 per litre.
The reduced threshold will see Kenyans pay more for alcoholic drinks.
Furthermore, on 29 May, 2020 Treasury CS proposed to amend Regulation 2 of the Excise Duty (Remission of Excise Duty) Regulations, 2017 as follows; deleting the words “eighty per cent” appearing in paragraph (1) and substituting therefore the words “sixty per cent”
The Excise duty remission on beer was introduced in 2017 on beer manufactured using agricultural produce grown in Kenya with the exception of barley. Further, the regulations were meant to discourage consumption of illicit brew and promote local farmers of sorghum, millet, cassava and other agricultural produce used in the manufacture of beer.
In their submission on this proposal, Kenya Breweries Limited said that the proposal to reduce excise duty remission from 80% to 60% has a net negative impact of Ksh16.5 billion annually to the keg value chain and will lead to total direct job losses of over 150,000.