Traders Warn of Job Cuts in KRA Tax Adjustment Plan

Traders in the alcohol value chain have protested plans by the Kenya Revenue Authority (KRA) to adjust excise taxes for various products from October 1, claiming the step will kill more than 35,000 jobs and lead to a loss of Sh15.7 billion in income by workers.

KRA has indicated excise duty on the products will increase by 6.3 percent effective next month in line with average annual inflation.

In a series of memoranda, farmers, bar owners, and entertainment outlets said raising excise duty on commodities including beer, spirits, and wines, will raise their overall tax burden by Sh20 billion and disrupt the sector, with sorghum and barley farmers expected to lose up to Sh588 billion.

They also complained that 300 direct jobs will be lost, 864 jobs along the alcohol distribution chain, and 30,600 jobs in trade.

The traders said it was unfair to plan another raise on taxes, when they have not recovered from the tax review tied to the Finance Act since July 1.

“In July 2022, Parliament passed Finance Act 2022 which increased the excise rates for beer by 10 percent. Consequently, barley and sorghum-based beer sales have declined by 21 percent and 32 percent respectively for July and August 2022, levels that were last observed in the same period last year when the alcohol industry was under Covid-19 restrictions,” the players stated.

The memoranda were sent to Kenya Revenue Authority (KRA) as input from the public and stakeholders, as the taxman readies to introduce the new tax reviews, to align with inflation pressures.

Farmers, the Association of Bar Owners of Kenya, Pubs, Entertainment, and Restaurants Association of Kenya, and Bars, Hotels, Liquor Traders Association of Kenya claimed that the reviews in the Finance Act 2022 considered the inflation KRA wants to adjust.

“The threshold of increase in the Finance Act 2022 considered average inflation in the past financial year and even went beyond it. It is irresponsible and excessive for the government to expect the public to shoulder such high taxes without any socio-economic justification,” they said.

They argued that considering the high cost of living and raising levels of illicit alcohol, KRA should not adjust the taxes for inflation this year.

In the proposed adjustment, the associations said excise duty on beers would raise from Sh134 to Sh142.44, on spirits from Sh335.3 to Sh356.42, and on wines from Sh229 to Sh243.42.

“Excise tax ‘inflation adjustment’ does not mean ‘increasing tax rates. The government should consider decreasing the level of taxes given the negative impact they have had and the high cost of living.”

They say tax increases on products such as beer and tobacco hardly yield higher collections but hurt farmers.