A fresh push has been tabled in parliament to hike beer, sim card and wine and spirits taxes. The new proposal was made on Thursday evening by Kikuyu Member of Parliament Kimani Ich’ungwah.
Ich’ungwah’s proposal is seeking to raise excise duty on beer, wine and spirits by between 20.2 per cent and 25.6 per cent.
Ichung’wah, who is the former chairperson of the budget committee, has also proposed a new Sh. 50 excise duty on every imported ready-to-use SIM card.
If these proposals are adopted, tax on a litre of beer will rise by 23.1 per cent to Sh. 150 from the current Sh. 121. This will in turn see the price of a bottle of beer rise by up to Sh. 15.
The new proposals are in opposition to the recommendations of the Finance and Planning Committee which had proposed to have the current taxes retained.
Punitive Finance Bill 2022 will kill businesses, destroy livelihoods
In addition, the new proposals are more punitive than the alcohol taxes that had been proposed by the National Treasury Cabinet Secretary Ukur Yatani in the Finance Bill 2022.
The National Treasury had proposed to raise excise duty on beer to Sh. 134 per litre, Sh. 229 for wine and Sh. 335.30 for spirits.
The proposals by the Treasury would have meant that within just one year, the government would have increased excise tax on beer by 45 per cent and on spirits by 55 per cent.
According to economic analyst Patrice Musumba, the hike in taxes will risk plunging consumers of alcoholic beverages into the world of illicit and dangerous brews. “The higher taxes are not warranted. They will make it very expensive for production. This means that alcoholic products will be expensive on the retail end as the customer will be forced to pay more,” he says.
For many consumers, the alternative is likely to be illicit, cheap brews and spirits. At the same time, says Musumba, manufacturers who specialize on low-end products might find it more difficult to stay in production.
“The taxes mean that companies such as Keroche Breweries that are already grappling with heavy taxation dues, whose primary market segment is low-end might, will face sustainability risks,” he says.
His sentiments resonate with the recommendation of the Budget Committee. “Increase in excise duty on beer may increase uptake of illicit brew. Additionally, the excise rate…had been revised in the Finance Act 2021, and should therefore be given some time before review,” the committee had earlier stated.
