Alcohol Prices Set to Hike in Proposed Tax Changes

  • Two mugs of beer in a bar.
    Two mugs of beer on a counter top in a bar.
  • The price of beer is expected to rise following changes by the National Treasury to slash the remission of excise duty of beer made from locally sourced material.

    Manufacturers producing alcohol content made from locally sourced raw materials including sorghum, millet, cassava or any other agricultural produce in Kenya, had their excise duty trimmed by to up to 80 per cent.

    Treasury however now proposes that the amount to be remitted be reduced to 60 per cent. These changes are likely to see the rise in prices of popular local beers such as keg, which is manufactured from sorghum.

    Excise tax is any duty on manufactured goods that is levied at the moment of manufacture rather than at sale. Excises are typically imposed in addition to an indirect tax such as a sales tax or value-added tax (VAT).

    An unlabeled brand of beer.
    An unlabelled brand of beer.

    Beer manufacturers had a reprieve where the excise duty regulations allowed them to apply for a write-off given their beer was manufactured using at least 75 per cent content of sorghum, millet or cassava grown locally.

    Beer makers were further required to pack the contents in a pressurized container of at least 30 litres, with the brew not selling for more than Ksh 100. 

    The Finance Bill 2020, proposes to change the excise duty for the coverage of alcoholic beverages including beer, cider, perry, mead, opaque beer and mixtures of fermented beverages with non-alcoholic beverages and spirituous beverages of an alcoholic strength not exceeding 8 per cent - previously this was 10 per cent.

    An analysis by KPMG Kenya revealed that the proposal reduces the beers which are subject to excise duty while increasing the spirits subject to excise duty. Given that the excise duty on spirits is higher, the changes will increase the excise duty collections.

    During the 2019 budget reading, the then Treasury CS Henry Rotich announced the increase in prices of wine, whiskey and cigarettes by an average of 15 per cent.

    He cited the fall in excise revenue as a percentage of GDP from three per cent in 2004 to two per cent in the 2017/18 fiscal year.

    "A 750ml bottle of wine will have an excise duty of Ksh136 which is Ksh18 more from the current rate; the duty of a bottle of whisky will go up by Ksh24 to Ksh182 for a 750ml bottle. The excise duty on a packet of 20 cigarettes will increase by Sh8 to Ksh61 per packet," Rotich stated in his Budget speech to the National Assembly.

    Treasury CS Henry Rotich and PS Kamau Thugge in court on July 13, 2019.
    Treasury CS Henry Rotich and PS Kamau Thugge in court on July 13, 2019