Kenya Revenue Authority (KRA) will be targeting beer drinkers and cigarette smokers in the next tax collection period. These consumers will feel the tax weight in the tax man’s bid to collect Sh150 billion more in the next period to finance the Sh1.45 trillion budget. This will see an increase in the prices of these commodities with the taxman proposing to tax the zero rated un-malted beer.
New taxes are set to be introduced with the existing ones adjusted upwards. Treasury has also proposed to drop tax exemptions and the zero rate Value Added Tax bracket.
KRA realised a drop in tax collection especially that of excise duty. This was mainly due to beer consumers shifting to non-malted beer whose excise duty was dropped to address the social problem of illicit brews. The move however according to KRA did not solve the problem as such and instead led to drops in the tax man’s revenue collection.
Consumers moved in large numbers to consume the cheap non-malted containerised beer causing low volume sales in malted beer and other taxable alcoholic products. KRA has been holding talks with beer manufactures to find a solution to the issue. East African Breweries Limited (EABL) expressed concerns on the tax man’s intention to tax the zero rated non-malted drinks which the manufacturer says experienced volume growth of up to 60% in the months up to March 2012.
KRA has a 17% growth target on collection of taxes for the next period. Treasury plans to use these funds to handle the challenge of the newly introduced county governments and the 2013 general election.