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Kenya's National Treasury has unveiled a new Tax Laws (Amendment) Bill, 2024, proposing changes to alcohol taxation, particularly affecting the pricing structure of wine and beer.
This legislation, previously integrated into the controversial Finance Bill, 2024, introduces a novel approach to excise duty calculation based on alcohol content by volume. The most striking change pertains to wine taxation, where the excise duty is set to increase substantially. The new framework shifts from a flat rate of Sh243.43 per litre to Sh22.50 per centilitre of pure alcohol. This adjustment will particularly impact wine consumers, as typical wines containing 11 to 13 percent alcohol by volume will face steeper taxation.
To illustrate, a one-litre wine bottle with 20 percent ABV will now incur an excise duty of Sh450, representing an increase of Sh206.57. Conversely, beer manufacturers and consumers stand to benefit from these changes. The excise duty on beer and similar beverages with alcohol content not exceeding six percent will decrease from Sh142.44 per litre to Sh22.50 per centilitre of pure alcohol. Popular Kenyan beer brands such as Tusker and White Cap, with their 4.2 percent ABV, will experience a reduction in excise duty from Sh71.22 to Sh47.25.
These reforms align with broader fiscal policy recommendations from the International Monetary Fund, which recently provided Kenya with an additional Sh78.3 billion loan. The Treasury has also introduced measures to support local agriculture by waiving excise duty on spirits produced from indigenous crops like sorghum, millet, and cassava. Furthermore, manufacturers will benefit from extended payment terms for excise duty, moving from a 24-hour window to the fifth day of the following month.
The bill extends beyond alcohol taxation, encompassing broader economic reforms including expanding the digital marketplace taxation framework, implementing a minimum top-up tax for multinational corporations, and adjusting pension contribution limits.