Beer consumers are set for a tax reprieve as the government moves to lower the excise levied on the product while slapping higher sin taxes on spirits, wine and cigarettes.
Beer consumers are set for a tax reprieve as the government moves to lower the excise levied on the product while slapping higher sin taxes on spirits, wine and cigarettes.
The Finance Bill 2024 proposes a new method of calculating excise on beer, wine and spirits based on pure alcohol content—also known as alcohol by volume (ABV)— unlike the present method which has a flat excise for each of the three types of alcoholic drinks.
The proposed changes will see beer of alcohol content of below six percent and wine levied excise at Sh22.50 per decilitre (10ml) of pure alcohol, while spirits will be levied Sh16 per decilitre of alcohol content.
In the present excise regime, excise on beer is charged at Sh142.44 per litre, wine at Sh243.43 per litre and spirits at Sh356.42 per litre.
If approved, the proposals in the Finance Bill will see the excise per litre of beers that have an ABV of 4.2 percent, such as Tusker and White Cap, fall to Sh94.50, effectively dropping the tax on a half litre bottle in which they are sold to Sh47.25 from the current Sh71.22.
Stout beers such as Guinness and Senator Dark Keg, which have ABVs of 6.5 percent and percent and 7.5 percent respectively, are however expected to attract slightly higher excise of Sh73.13 and Sh84.37 respectively per half litre bottle.
Although their ABV falls above the six percent threshold indicated by the Finance Bill, industry sources say they are classified under the same excise band as other beers, since they cannot be taxed under the spirits category.
For wines, which normally have about 12 percent ABV, the excise per litre will go up to Sh270 from the current Sh243.43.
Spirits will meanwhile see a steep rise in excise as a result of the change to an ABV based calculation, indicating that the government is looking to cash in on the growing popularity of these drinks compared to beer.
Majority of the spirits sold in the market have an ABV of between 37 percent and 45 percent. At the lower ABV range, the excise duty per litre will jump to Sh592 per litre, while for those with an ABV of 45 percent, the excise will jump to Sh720 per litre.
The spirits are commonly sold in 750ml bottles, which will now attract excise of between Sh444 and Sh540 per bottle based on the ABV.
For cigarettes, the Treasury is proposing to increase duty on unfiltered cigarettes, which are commonly used by lower income smokers, from Sh2,926.41 per mille (1,000 sticks) or Sh2.96 per cigarette stick to Sh4,100 per mille, or Sh4.10 per cigarette.
On filtered cigarettes, the excise per mille has been raised to Sh4,100 from Sh4,067.03 previously, translating to an excise increase from Sh4.07 per cigarette to Sh4.10.
Similarly, the government wants to raise the excise on products containing nicotine or nicotine substitutes—such as nicotine pouches— from Sh1,595 to Sh2,000 per kilogramme. The excise on liquid nicotine, which is used in e-cigarettes and vape devices, is set to go up from Sh70 to Sh100 per millilitre.
