Brewer supports bid to widen tax bracket to net the informal sector

Kenya Breweries Limited Managing Director Jane Karuku participating as panellist in the 4th Annual Tax Summit at Kenya School Of Monetary Studies. PHOTO | SALATON NJAU | NMG

What you need to know:

  • Kenya Breweries says the expansion of both tax and taxpayer base areas the best option to reduce pressure on honest taxpayers and increase revenue.

Kenya Breweries Limited (KBL) has supported efforts by the government to widen the tax bracket, saying netting the informal sector would help the country ease the burden of funding the Big Four agenda.
The brewer said the expansion of both tax and taxpayer base areas the best option to reduce pressure on honest taxpayers and increase revenue.

This, KBL Managing Director Jane Karuku, said would help meet targets through larger numbers, whether by individuals or business entities.

“We are happy that the Kenya Revenue Authority (KRA) is planning to widen the tax bracket, which is good because you get more money. Compliant businesses will mean a lot of things will be done properly and business is likely to be more sustainable,” said Ms Karuku during a panel discussion at the KRA Tax Summit, which was held at the Kenya School of Monetary Studies.

Ms Karuku said that high-taxes is a key challenge in the country, aggravated by the presence of illicit alcohol market because consumers shift towards them when the taxed formal products are too expensive.

Ms Karuku disclosed that in 2013 when low-end beer Senator Keg’s remission was revised from 100 per cent to 50 per cent, prices went up by 67 per cent, while demand plummeted by 75 per cent, leading to a proliferation of illicit alcohol.

“This denied the government revenue. When Treasury did a revision in 2016, the brand recovered and we even invested over Sh15 billion to set up a new brewery in Kisumu. There will be even greater wins if the remission is pushed up to 90 per cent,” said Karuku.

The brewer also proposed stringent enforcement, adding that this will deter illegal practices such as undeclared production, smuggling across porous borders and counterfeits.

For example, a Kenyan consumer pays about 36 per cent of the retail price of alcohol as excise tax, which is more than triple the amount paid by their counterparts in developed economies like USA (11 per cent) or Tanzania (25 per cent).

Incentives such as tax holidays for innovations and licence waivers, added Karuku, will promote and catalyse growth in the manufacturing sector.

“A stable tax regime will promote Kenya as an investment destination both for local and international investors. Tax increases above inflation stifle industry growth, discourage investment in the sector and also fuel illicit trade.” Tax expert Mr Nikhil Hira of Bowmans Kenya backed the suggestion to widen the tax bracket saying Kenya’s existing tax base, consisting largely of a comparatively small number of individuals and companies, is too narrow.

He said in difficult economic times, it is not sufficiently productive of revenue to fund government expenditure.

Experts have argued that a low tax base leads to high taxation of a few people and tax evasion.

Mr Hira was also a panellist during the discussions titled ‘Accelerating the Growth and competitiveness of the manufacturing sector in Kenya.’

KRA missed its 2017/2018 financial year revenue target by Sh172.4 billion. The taxman collected Sh1.48 trillion or an average Sh123.93 billion a month in the year ending June 2018 against a target of Sh1.65 trillion.