The Alcoholic Beverage Association of Kenya (ABAK) has expressed its opposition to a proposed 67 percent excise tax hike on spirits in the Kenya’s medium-term revenue strategy.

ABAK argues that such an increase will negatively impact the spirits market, which is already struggling, and could potentially lead to the proliferation of illicit alcohol within the industry.

The association suggested in a statement that retaining the current excise tax rates would be a more suitable approach. They believe that increasing excise tax on spirits would exacerbate the existing dire situation, as illicit alcoholic brands are already prevalent in the market, following raids by the administration targeting illicit drinks.

ABAK estimates that keeping the current rate of excise tax would result in an average annual growth in excise revenue of 4.45 per cent for spirits, depending on excise changes in other alcohol beverage categories.

According to an analysis by the East African Community (EAC) tax policy sub-committee, the proposed tax changes, which are supported by the International Monetary Fund (IMF), aim to increase the minimum excise rate based on liters of pure alcohol (LPA) from the current Shs 356.4 to Shs 596.

The lobby observes that previous rounds of excise tax increases have not only reduced government revenue from the alcoholic beverage industry, but have also contributed to the challenge of illicit alcohol. They argue that the tax hikes have not achieved their intended goals and have instead encouraged the consumption of illicit alcoholic products.

Kenya had previously raised excise tax on spirits by 20 per cent in July of the previous year and then by a further 6.3 per cent the following October.