NAIROBI: Kenyans want a tax break on beer and heavier taxation on spirits, the ‘Citizen Alternative Budget’ has found out. The survey on the aspirations of the ordinary Kenyan revealed that beer drinkers were paying for the consumers of the cheaper alcoholic alternatives of wines and spirits, through the current ‘distorted’ excise tax policy.
“Given that spirits and wines have a higher alcoholic density by volume compared to beer, the disproportionate taxation of beer implies that beer cross-subsidises spirits sold in the Kenyan market,” said Institute of Economic (IEA) Affairs Programme Officer Raphael Muya said.
Kenya Revenue Authority (KRA) levies excise duty on alcoholic drinks by volume, rather than the alcohol content as proposed by the IEA. Spirits such as whisky, gin and vodka attract Sh120 per litre or 35 per cent of price whichever is higher while beers are taxed at Sh70 per litre or 50 per cent per litre, whichever is higher. That taxation matrix has informed a huge market shift that has seen consumers ditch beers for the cheaper spirits.
In response, dozens of distillers have sprung up in all major towns where the manufacture of spirits is booming business. But the proposal to change the taxation formula could spell doom for such distillers and consumers. “The excise tax policy for alcoholic drinks should standardise the amount of taxes extracted based on alcohol volume of a product as opposed to the quantum of litres,” said Muya.
That proposal, he said, would reduce the distortion that occurs by taxing alcohol by litres consumed as opposed to the density of pure alcohol in a product.
The public policy think tank was presenting a summary of proposals by different stakeholders who had attended a public forum in January. A review of the ‘sin tax’ guidelines is only one of a long list of proposals collected and synthesized by the IEA.
