Government increases tax on spirits

Alcohol consumers will pay more for their drinks after the government increased tax on spirits by 14.3 per cent.

National Treasury Cabinet Secretary Henry Rotich on Thursday said spirits, whose customer base has grown rapidly in the last five years, would be subject to an excise tax of Sh200 a litre, an increase of Sh25.

Low-cost beer made from sorghum, millet or cassava will enjoy a tax remission of 80 per cent, down from 90 per cent.

This means beer makers will pay a duty of 20 per cent, up from the current 10 per cent.

“While taxation of beer has not changed, the inflation adjustment that will be effected from July 1, will increase government revenue in line with inflation,” he said.

Manufactures of low-cost beer were in 2015 handed a reprieve when tax remission was increased from 50 to 90 per cent through the Alcoholic Drinks Control (Amendment) Act.

Last year’s Finance Act repealed that section of the law, forcing brewers to apply to the National Treasury in order to continue enjoying the remission.

Mr Rotich has moved to ease administration of this duty, setting the stage for brewers to pass the extra costs to consumers.

The commercial viability of Senator Keg, which targets low-income earners, is highly dependent on protection from maximum taxation since consumers react quickly to price adjustments.

The minister said the measures were meant to discourage consumption of illicit drinks even as he went in for a slice of the proceeds from high value spirits.

EABL, the country’s leading brewer, saw sales of its spirits grow by 26 per cent in the six months to September as Kenyans with higher income embraced brands like Johnnie Walker, Smirnoff and Ciroc.

The brewer has announced a Sh900 million investment in a new spirits line to grow this segment as its mainstream beer continues to underperform due to high taxes.

Mr Andrew Cowan, the firm’s chief executive, says increased taxation of its products has dampened demand through price increments.