Importers and distributors of alcoholic drinks are set to come under stiff regulation to curb tax evasion and contraband.
A law set to replace the six-year old Mututho law will limit the number of distributors allowed to import and sell alcoholic drinks.
The new law will control the distribution of alcoholic brands to lock out players who sneak in sub-standard products without paying taxes or adhering to health standards.
“Parallel importers smuggle in products and sell at prices that undercut the legitimate distributors without paying taxes or checking whether the quality is certified,” said Kenya Revenue Authority Commissioner-General John Njiraini at a press briefing in Nairobi on Wednesday.
Mr Njiraini said the new Alcoholics Control law will co-ordinate enforcement, giving the taxman a say on who gets distribution licences — currently an exclusive function of county governments.
This comes after revelations of the existence of a cartel that has penetrated the high-end alcohol market with counterfeit liquor of mostly foreign brands.
The cartel even prints its own fake KRA stamps. The police and KRA officials recently confiscated some 391 boxes of fake stamps. The boxes would contain 46.8 million stamps whose sale values amounts to Sh70 million.
When used on one-litre bottles they would earn KRA Sh8.1 billion in excise tax revenue. KRA has since introduced new generation excise stamps with the Quick Response Code which can be authenticated using smartphones.
The Alcoholic Beverages Association of Kenya (ABAK) Vice Chairman Anthony Kagiri said at the joint press briefing that traders support the exclusive dealership proposal which will make it easier to trace products to a known manufacturer.
“The problem is that you as a local importer go and sign a contract with an overseas company, but when you go to outlets you get other people have stocked your product.
‘‘In the event that it runs into a mess the taxman comes to you because you are the official distributor yet the product is not in your batch,” said Mr Kagiri.
The Competition Authority of Kenya (CAK) director-general Wang’ombe Kariuki however said that although he had not seen the proposed laws, such a move would require the taxman to demonstrate that the anticipated public benefit outweighs the lessening of competition expected to arise from the new legislation.
Kenya’s competition law prohibits exclusive agreements. ABAK Chairman Gordon Mutugi said they support brand protection.
“The Mututho law is being repealed totally because it had fundamental shortcomings which failed to look at the ease of doing business, it was more of a campaign against drug consumption,” said Mr Mutugi.
Mr Mutugi’s association represents EABL (KBL & UDV), Africa Spirits Ltd, WOW Beverages, London Distillers Kenya, Kwal and Distell Winemasters (K) Limited.
The new law will also legislate administrative steps to be taken by KRA to limit the importation of ethanol to the 21 registered manufacturers.
It will also impose punitive measures on counterfeiting and selling alcoholic beverages to the underage. The Mututho law replaced the Chang’aa (local spirit) Prohibition Act and African Drinks Control Act in August 2010.