BAHLITA Boss Warns KRA Against Adjusting exercise Duty by 6.3 percent, Calls For President William Ruto’s Intervention
Bar,Hotels and Liquor traders Association Owners Association (BAHLITA) has warned KRA against the adjustment of the exercise duty by 6.3 percent to cushion the government’s revenues from being eroded by imported inflation.
Speaking to the press during a stakeholder engagement session on the proposed increase on
excise duty on alcoholic products BHARLTA secretary general Boniface Gachoka said the move is uncalled for and ill-intended.
“From the onset, we wish to categorically state that as players in the alcoholic value chain, we are opposed to any further price increase of public goods as it goes against the spirit of patriotism, especially in the face of the current difficult economic conditions. Additionally, there is a need to give time to investors in the Bar and Restaurant industry to recover from the effects of COVID-19. Two years down the line, the industry is still struggling to get back to its feet,” BHARLTA secretary general said.
Some of the products that are targeted for price increases include beer, bottled water, cider, fruit juices, berry, and other fermented drinks among others.
He said the move is uncalled for and heading in the wrong direction because when the Finance Act 2022 was passed in July 2022, it contained an increase in the excise rates for beer and spirits by 10% and 20% respectively.
“At the same time, the KRA Commissioner General is required to adjust annually the specific rates of Excise Duty taking into account the rate of inflation. We find this to be an excessive over-taxation to the ordinary mwananchi who is looking at the government to cushion it from such vagaries,” he added.
They said the impact of 2 major successive excise tax increases in less than 3 months negatively impacts consumer welfare, and increases illicit trade and cost of living since petroleum products are included in the proposed increase and it has the effect of putting a knee on the necks of an already burdened population.
“It has to be noted that the alcoholic and beverages industry is yet to stabilize from the impact of COVID-19 and consumers are yet to adjust to the high commodity prices as contained in the Finance Act 2022,” he said.
He noted following the 10% and 20% excise increase on beer and spirits effected through the Finance Act 2022 in July 2022, alcohol consumption has declined in favor of illicit, where thye have observed a decline of 21% and 32% in barley and sorghum-based beers respectively.
“Additionally, the global fuel prices and the war in Ukraine continue to put pressure on households that are already grappling with high commodity prices and cost of living. As a result of the constant increase of taxes on alcoholic drinks, the net effect is the current consumers of value brands to down trade further and buy illicit alcohol. This will in turn lead to the growth of illicit alcohol trade from the current 44% as a situation that will jeopardize our consumers’ health, increase government spending on its health facilities, and reduction of revenue for the
Government,” he said.
Gachoka said locally manufactured finished goods distribution and retail alcohol trade (which is
dominated by Micro and Small Enterprises-MSMEs) is expected to lose KES 4.2Bn in reduction of raw material use, KES 15.7Bn in employment income loss, and 35,364 jobs will be lost.
“The arbitrary increase in taxes by KRA goes against the principles of public finance that encourage tax predictability. Our East African neighbors, Uganda and Tanzania have managed to retain their taxes in the last 4-5 years, this, therefore, makes Kenyan industries uncompetitive while fueling the entry of contraband into Kenya. This continues to exacerbate unintended consequences of high taxes – illicit trade, counterfeit from Tanzania and Uganda,” he said.
He said a proliferation of contraband alcohol increases the premium for tax evasion among unscrupulous players in the informal market whereas a result, compliant businesses and indeed the Government must expend resources in enforcing compliance to protect revenue and market share from untaxed alcohol and counterfeit.
“ For instance, industry and government are currently spending considerable resources on excise stamps and ant counterfeit measures. indeed, these resources can be saved if the Government reduces its pressure to increase taxes,” he noted.
Chalicha Peter Nandi County BHALTA chairman said the Increase in tax rates on alcohol also has an adverse effect on other sectors of the economy and indeed tax revenues from those sectors.
“We are calling upon the new President of the Republic of Kenya,
H.E Dr. William Samoei Ruto to intervene in this matter and allow for further stakeholder engagement in line with his campaign promises that were premised on lowering the cost of living and securing jobs for the ordinary Kenyans.,” he said .
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