KRA asked to exempt alcoholic beverages from planned tax hike

Monday, September 19th, 2022 04:56 | By
Alcohol. PHOTO/Courtesy
Alcohol. PHOTO/Courtesy

Players in the alcohol manufacturing space now want the commodity excluded from the 6.3 per cent inflation-adjusted tax on consumers set to take effect next month.

The industry stakeholders say the exercise tax announced by Kenya Revenue Authority (KRA) is expected to raise the cost of alcoholic products amid the high cost of living in the country.

They estimate that effecting the tax will lead to a reduction in revenue to 15,000 millet and barley farmers or about Sh588 million in losses.

In their submissions to Githii Mburu, KRA Commissioner General, Bars, Hotels and Liquor Traders Association (BAHLITA), Pubs, Entertainment and Restaurants Association of Kenya (PERAK), Alcoholic Beverages Association of Kenya (ABAK) faulted the move, saying that its unlikely to increase the Taxman’s revenue. BAHLITA in the submissions said that excise tax inflation adjustment does not mean it will increase tax rates but rather only threatens the survival of alcohol-selling outlets which mainly comprise micro, small and medium enterprises.

“The government should consider decreasing the level of taxes given the negative impact they have and the high cost of living,” it said.

Cost of living

The Excise Duty Act 2015 proposes an adjustment in excise duty every year in consideration of the cost of living.

In line with this, KRA is expected to adjust the tax rates on the items using the average inflation rate for the financial year 2021/2022 of six decimal three per centum (6.3 per cent). PERAK noted that increases on excisable items such as beer and tobacco hardly yield higher collection for the government hence called on it to reconsider the increase. “If anything, traders are still required to pay income tax and County government Licenses eating further into their trade margins,” it added. The taxman is expected to adjust the tax rates on beer, wine, and cigarettes from October 1, 2022.

In their submissions, the stakeholders noted that the increased taxes would negatively affect their industry as they will lead to an increase in the cost of production which is then transferred to consumers.

They also said the planned tax increase is in contravention with principles of public finance as this continues to increase the level of unpredictability and places an undue burden on the public.

BAHLITA and PERAK  said tax increase will have a negative impact on finished goods distribution and retail trade , leading to a loss of Sh15.7 billion in employment income loss and 35,364 lost jobs.

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