Alcohol manufacturers want advance excise duty halted

According to the Kenyan Alcoholic Beverages Association, forcing legal alcohol producers to pay excise duty within 24 hours of removing their products from the stockroom will punish innocent participants for Kenya’s shortcomings in controlling illegal alcohol.
They pointed out that although the idea was supposed to stop the trafficking of illicit alcohol, it is more likely to end up boosting it because it was not taken through public input and was simply included to the Finance Bill by the National Assembly’s Finance Committee.
The implementation of the provision through the Finance Bill, according to ABAK Chairman Eric Githua, is not essential because the current model, in which producers return the tax following the reconciliation of sales, is effective.
A consumption tax known as excise duty must be applied at the point of consumption. Before being consumed, the product in the alcohol industry travels along a value chain that includes distributors and retailers.
“Our members have stayed compliant in paying excise duty, contributing to the development of Kenya’s economy even in these trying times. Effectively implementing the advance payment is a foolish, counterproductive measure that will cripple legitimate alcohol manufacturers and boost illegal alcohol sellers who already do not pay taxes,” according to Mr. Githua.
The Illicit Alcohol Prevention Taskforce submitted the suggestion, which was then taken up by the Finance Committee. The idea, according to ABAK, should have been submitted to public comment and industry participants’ opinions should have been sought out because it calls for significant changes in the way these companies operate but wasn’t included in the original Finance Bill.
“Making it more difficult for legitimate producers does not deter illegal alcohol traffickers. The government ought to do every effort to track down the ethanol’s source, its flow, and the eventual production of this dangerous booze,” according to Githua.
“According to a recent Euromonitor survey, the government continues to lose Ksh71 billion annually despite its efforts to stop the sale of illicit alcohol.” Added Githua.
Manufacturers just serve as collection agencies for the eventual consumers of the goods because excise duty is a consumption tax.
The entire purpose of levying an excise tax, according to ABAK, will be defeated because manufacturers will be paying a cost that should be paid by consumers because the taxes have already been paid in advance.
In order to maintain compliance by alcoholic makers, manufacturers will be obliged to assess the contracts they have with their distribution networks, including outlets like pubs and restaurants, and require upfront payment on all orders.
The Kenya National Bureau of Statistics’ 2022 Economic Survey states that in 2021, the government received Ksh44.7 billion from domestically produced wine, beer, and spirits.
In 2022, it is predicted that sales of domestically produced beer, wine, and spirits will total Ksh47.5 billion when inflation is assumed to be 6.3%.