East African Breweries Ltd (EABL) has warned of a looming increase in excise duty of alcohol between five and 10 per cent.
Kenya has one of the highest excise tax rates on alcohol in East Africa and the increase in excise duty is in line with inflation.
“The Kenya excise regime is a lot more aggressive than that of Tanzania and Uganda. We expect the Kenya government to increase the excise rates in line with 5-10 per cent inflation rate while Tanzania held the prior year excise rates,” the alcohol maker said in its 2020 annual report.
The alcohol industry has been hard hit by the Covid-19 pandemic. Bars and entertainment joints remained shut or scaled-down opening hours for the past year. Consumer purchasing power has also gone down since the pandemic has forced a reduction of legal drinking hours and it is not clear what measures the government will take to protect its key revenue source.
Sin tax, excise tax, is one of the oldest levies worldwide imposed on certain products viewed as harmful to people’s health and a luxury. Kenya Revenue Authority lists goods such as tobacco, beer, wines and spirits, soft drinks such as juices, soda and other non-alcoholic beverages, bottled water, sugar confectioneries and chocolates among those that attract excise duty.
Coronavirus pandemic has hit East African Breweries Ltd (EABL) wiping out nearly half of its net profits in the first six months of the year to December 31, 2020. Its profit after tax fell by 47 per cent to Sh3.79 billion for the half year from Sh7.2 billion in the same period of 2019. Net sales fell by three per cent.