East African Breweries Limited (EABL) has said it will increase the prices of its products if the Treasury implements a proposal intended to raise the corporate tax from 30 percent to 35 percent for firms with annual income of more than 500 million Kenyan Shillings.
The managing director for Kenya Breweries Limited; Jane Karuku says a tax increase will be a shock to the business, given that the sector is already one of the most heavily taxed in the country.
“Going to 35 per cent will be a shock to us and counter-productive for business. We are among the highly taxed companies in Kenya and in the region,” she said.
Jane further added that “Increasing the tax base means we also have to pass some of it to the consumer. That is going to make Tusker bottle move from retail price of 160 Kenyan Shillings to about 180 Kenyan Shillings because the 35 percent works on the whole total drinks.”
While speaking on Wednesday April 18th 2018, ahead of the company’s (EABL) presentation on proposed tax reform to the Treasury for 2019/2020 financial year, The Managing Director said that of the 160 Kenyan Shillings recommended retail price of a Tusker brand, 87 Kenyan Shillings goes to tax and that any further increment in excise and corporate tax will drive low end customers to illicit brews.
Jane Karuku also told the press that with inflation rising, a tax rise would make brands expensive, increase the cost of doing business and make Kenya lose its competitive edge.
The Treasury last year introduced changes to the law where excise duty will now be reviewed annually, with the rate pegged to the average rate of inflation of the past year.
The Alcohol business has also had challenges between national government laws and county government laws, which have led to a disruption of businesses in counties such as Kiambu.
Corporate Relations Director of East African Breweries Limited (EABL) Eric Kiniti, said the company is concerned by the lack of a harmonised taxation system between the national government and county governments, adding that “Each county has its own law on the regulation of alcohol. Since this falls under devolved functions, we are working with the Council of Governors to push for the implementation of a uniform law on alcohol regulation across the counties”.
In January 2019, EABL posted a 33 percent increase in its half-year profit after tax for the year ending on the 31st of December, 2018, to close at 6.6 billion Kenyan Shillings, compared to the same period last year.
The company added that it recorded a pre-tax profit of 9.7 billion Kenyan Shillings with a 13 percent growth in net sales to 41.6 billion Kenyan Shillings over the same period under review.
CEO of EABL Group; Andrew Cowan said in a statement that the 33 percent growth was as a result of a continued focus on productivity assisted by increased investment in marketing.
Andrew Cowan also said in a statement, that the growth was broad-based being that it spread out across various segments and regions, as the business benefited from lapping a weak half following the presidential election in Kenya”.
EABL’s growth in net sales was experienced across the three East African countries where Kenya and Uganda posted 12 per cent growth each while Tanzania had 26 per cent.
Cowan said “Beer grew 12%, driven by Senator Keg performance in Kenya, improved mix in Uganda and continued strong delivery of Serengeti in Tanzania. Spirits grew 16% on the back of strong performance in mainstream spirits and Scotch whisky as well as vibrant innovations”.
