NAIROBI, Kenya, Feb 14 – The Alcoholic Beverages Association of Kenya (ABAK) has opposed the government’s plan to increase the cost of excise duty stamps saying it will negatively impact business while driving more Kenyans to illicit alcohol.
The Kenya Revenue Authority (KRA) recently proposed plans to review the Excise Duty Regulations, 2017, through The Excise Duty (Amendment) Regulations, 2023 which contain the new costs for the duty stamps as part of its measures to increase revenue collection.
In the proposed regulations, wine and Spirits face a 79 per cent increase in the cost of stamps from a previous Shs2.80 to Sh5. As for beer and cider, they face a 100 per cent increase in the cost of stamps from Sh1.50 to Sh3.
According to ABAK Chairman Eric Githua, the proposal is ill-timed given the current tough economic conditions in the country.
Githua also noted that the proposal goes against the original intention of the Excise Duty stamp; which was to be used as a means of improving revenue collection by addressing the challenges of illicit trade and increasing the traceability of products.
The Association has asked the National Treasury and KRA to abandon the excise stamp review noting that it will not only be unreasonable but unfair to manufacturers and distributors of alcoholic beverages as it comes barely five months after the increase in Excise Duty for inflation in October 2022.
It added that another effect of increasing excise duty is that formal alcohol will go beyond the reach of some consumers, making Kenya an unattractive destination for business, and this in turn will lead to declining revenue.
According to the Association, the high taxes on alcohol products has already resulted in a drop in legitimate alcohol sale and an increase in illicit alcohol.
According to World Health Organization data, 44 per cent of total alcohol sold in Kenya is illicit.
Further, ABAK noted that while the Excisable Goods Management System was created to help deal with counterfeits and enhance the traceability of products, it has not been successful as KRA continues to grapple with the challenge of counterfeit excise stamps.
“There’s an increase in the number of products seized having fake stamps with a spike recorded in the months of November and December 2022,” said ABAK.
Production of illicit alcoholic beverages from illegally obtained ethanol is also on the rise with Kenya recording losses of about USD259million, according to a report by Enact Africa.
“It is therefore apparent that the Government’s strategy for tackling counterfeit through excise stamps needs to change,” the Association said.
ABAK put out a suggestion to the government saying that with advances in technology, they see no reason why KRA cannot adopt digital stamps as opposed to the current paper stamps.
ABAK urged the government to halt the implementation of the new regulations and to conduct an assessment of the current Excise Duty and its administrative system compared to other East African countries so as to spare manufacturers the increase in the cost of production and compliance and subsequently reduce the risk of exposure of illicit alcohol to Kenyans.
ABAK’s submission comes just as the Kenya Revenue Authority extended the deadline for submission of comments on the Draft Excise Duty Amendment Regulations 2023 to February 21 from Feb 3.
