Tax waiver on Senator a relief for beer maker
What you need to know:
- The parliamentary budget office has suggested the reinstatement of excise tax remission on the brand in the face of decreased consumption due to high cost.
- East Africa Breweries Limited estimated that the nose dive in demand resulted in closure of 5,000 retail stores even as the beer maker reduced production at its factory from seven days a week to five.
- The cheaper alternative to beer was introduced in 2004 by the brewer in a bid to lure alcohol consumers from illicit brews.
Parliament has proposed to recommend a tax waiver on Senator Keg, in a move that promises a new lease of life to East Africa Breweries and consumers.
The parliamentary budget office has suggested the reinstatement of excise tax remission on the brand in the face of decreased consumption due to high cost.
Until last year, Senator Keg was enjoying a tax exempt status which made it affordable to alcohol consumers at the low end of the market.
The National Treasury, however, imposed a 50 per cent tax with an aim of raising Sh6.2 billion to finance the 2013/14 national budget. The resulting increase in retail price precipitated a sharp drop in sales for the beer.
Already, the brewers have held meetings with the finance committee, which is expected to agree with the budget team before an amendment to the Finance Bill is made.
East Africa Breweries Limited estimated that the nose dive in demand resulted in closure of 5,000 retail stores even as the beer maker reduced production at its factory from seven days a week to five.
NO NEW CONTRACTS
The beer marker has also said it will not be renewing its contracts with over 20,000 sorghum farmers across the country for the supply of the grain which is the primary raw material for Senator Keg.
“This year, we will not be renewing a majority of 26,000 contracts simply because we do not need all that raw material at the moment,” the brewer’s managing director, Mr Charles Ireland, said at an investor briefing.
Last week, the company reported a five per cent growth in after-tax profit to Sh6.85 billion, but announced that sales of the previously fast-growing Senator Keg had dipped by 75 per cent.
CONSUMPTION PLUMMETED
The cheaper alternative to beer was introduced in 2004 by the brewer in a bid to lure alcohol consumers from illicit brews.
It is estimated that while production has doubled over the years, consumption has plummeted to about three million litres from 20 million litres a month after the tax remission was removed.
