EABL Warns: Guinness, Senator Dark, Chrome Prices to Rise with Finance Bill 2024
East Africa Breweries Limited (EABL) is cautioning against significant job losses in the alcoholic beverage sector if the government follows through with its plan to hike taxes on the industry in the upcoming financial year.
Eric Kiniti, EABL’s Corporate Relations Director, stated that this tax increase could result in over 1,000 job losses in the sector and warned of the extensive impact of higher prices for legitimate spirit products.
The Finance Bill 2024 has gained attention due to its stringent taxation measures. Although the bill offers some relief for beer drinkers, it imposes heavy taxes on spirits, which are more widely consumed, potentially leading to significant price hikes if enacted.
The bill proposes higher taxes on certain beers, specifically those with an alcohol volume above 6.33 percent. This means consumers of brands like Guinness and Senator Dark will face increased costs.
For spirits, which represent 69 percent of alcohol consumption, consumers may see prices nearly double. Kiniti explained that higher local prices could make imports more appealing, threatening local manufacturing jobs, with potential losses exceeding 1,000 positions, and encouraging imports over local production.
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Brewers also worry that higher costs could drive up the consumption of illicit brews. For example, a 250-milliliter bottle of Chrome vodka could rise from Ksh.300 to Ksh.600, a 70 percent increase, which may push low-income consumers towards unsafe, illicit alternatives.
Current data indicates that 59 percent of alcohol consumption in the country is illicit, primarily driven by spirits. Kiniti pointed out that low-income earners, who seek affordable and safe options, might resort to illicit alcohol if legitimate products become too expensive.
Increased taxation on alcoholic beverages during economic hardship may reduce government revenue from the current Ksh.18 billion generated by spirits, potentially dropping to Ksh.15 billion or less, according to warnings given to policymakers.
The government collects around Ksh.167 billion in excise taxes, with the alcohol industry contributing about 30 percent, or approximately Ksh.51 billion. Kiniti noted that this amount might decrease significantly from the previous year’s figures if the new taxes are implemented.
Kiniti advocates for the government to move away from erratic taxation and establish a stable and predictable tax policy to enable businesses to adapt effectively.
EABL Warns: Guinness, Senator Dark, Chrome Prices to Rise with Finance Bill 2024