Kenya: Relief for beer makers after U-turn on daily tax payments

Kenya’s government has reviewed its demand on manufacturers of alcoholic drinks to remit taxes within 24 hours after widespread criticism of the policy shift, with firms such as East African Breweries Plc (EABL) partly blaming the change in law for drop in profits, Business Daily Africa reported on May 13.

Treasury Cabinet Secretary Njuguna Ndung’u is seeking approvals from lawmakers to extend the period within which alcohol makers will remit taxes to five days from the time goods leave stores to distributors.

“Section 36 of the Excise Duty Act is amended in Subsection (1A), by deleting the words ‘twenty-four hours’ and substituting therefor the words ‘five working days’,” Prof Ndung’u wrote in the Finance Bill 2024, tabled in the National Assembly on May 7.

Amendments in the Finance Act 2023 had compelled alcohol manufacturers to remit excise duty to the Kenya Revenue Authority within a day after moving goods from stockroom.

That was a shift from the previous policy where the manufacturers of alcohol paid duty of the previous month on the 20th day of the following month, meaning the taxes were remitted monthly.

The new move, which comes into force next financial year if approved by legislators, will come as a slight relief to brewers and distillers of alcoholic beverages who have been forced to pay taxes before they make sales.

UK’s Diageo-controlled EABL, the largest brewer in the region, had partly blamed the 22.1 percent drop in half-year profit for the period ended December 2023 to Sh6.8 billion on the requirement to pay taxes daily.

EABL Chief Finance Officer Risper Ohanga said in January that the publicly-traded firm has been compelled to take expensive short-term loans to comply with demands of the excise duty regime.

“Because you don’t want to underpay and be hit by penalties, you are constantly paying ahead and then trying to get back and rebalance numbers,” Ms Ohaga said.

13 May, 2024