Tax on cheap alcohol harming consumers

What you need to know:

  • While production of the beer has doubled over the years, consumption plummeted to three million litres from 20 million after tax remission was removed.
  • Keroche pointed out that the benefits of the brewers’ efforts to supply cheap, safe, and hygienic drinks to the low-end market have been reversed by high taxes.
  • As long as conventional alcoholic drinks remain expensive and out of the reach of consumers, unscrupulous dealers will always find a way to make cheap and dangerous illegal brews to fill the gap.

The number of people who have died or been permanently incapacitated after consuming illicit brews lends credence to the tag on Kenya as a drinking nation.

Despite preaching and the high-handedness of self-proclaimed moral crusaders, alcohol continues to consume many Kenyans, especially the youth.

The Parliamentary Budget Office deserves a pat on the back for facing up to this stark reality and suggesting the reinstatement of excise duty remission on Senator Keg, which until

2013 enjoyed tax-exempt status, making it affordable to consumers at the lower end of the market. In that year, the National Treasury decided to impose a 50 per cent tax on the beer with the aim of raising Sh6.2 billion to finance the 2013/2014 national budget.

Tragically, this has had consequences, with the resulting increase in retail prices precipitating a sharp drop in sales.

East African Breweries Limited (EABL) estimated that as a result of the new taxation measures, 5,000 retail stores would be closed. The company cut back production at its factory from seven to five days a week.

It also said it would not renew its contacts with more than 20,000 sorghum farmers across the country for the supply of the grain, the primary raw material for Senator Keg, whose sales fell by 75 per cent.

CONSUMPTION PLUMMETED

While production of the beer has doubled over the years, consumption plummeted to three million litres from 20 million after tax remission was removed. At the same time, there was a sharp increase in the consumption of illicit brews and the attendant deaths.
This defeats the purpose for the introduction of the brand in 2004, which was to woo consumers from the deadly illicit brews.

EABL and its counterpart, Keroche Industries, have petitioned Parliament to review the taxation regime for the low-end market.

Keroche pointed out that the benefits of the brewers’ efforts to supply cheap, safe, and hygienic drinks to the low-end market have been reversed by high taxes.

It cited the example of its Vienna fortified wine, saying a 1,100 per cent tax increase in three years ended up killing the product in 2007. Its successor, Vienna Ice ready to drink vodka, seems set to suffer the same fate after attracting a 70 per cent tax increment over three years.

The Parliamentary Finance Office must see the logic in these arguments and agree with the budget team on the way forward. The government and the relevant stakeholders must ensure that the low-end market has a variety of affordable alcoholic drinks to widen the choice for consumers.

As long as conventional alcoholic drinks remain expensive and out of the reach of consumers, unscrupulous dealers will always find a way to make cheap and dangerous illegal brews to fill the gap.

Kimani wa Njuguna is a teacher in Gatundu District, Kiambu County. [email protected]