Following widespread backlash, the government has reconsidered its directive requiring alcoholic beverage manufacturers to remit taxes within 24 hours. This move comes after companies like East African Breweries Plc (EABL) partially attributed a drop in profits to the sudden change in legislation.
Treasury Cabinet Secretary Njuguna Ndung’u is now seeking approval from stakeholders to extend the tax remittance period for alcohol producers to five working days from the time goods leave warehouses to distributors.
“In Section 36 of the Excise Duty Act, Subsection (1A) is amended by replacing the words ‘twenty-four hours’ with ‘five working days’,” stated Prof Ndung’u in the Finance Bill 2024, presented in the National Assembly on Tuesday.
The amendments introduced in the Finance Act 2023 had mandated alcohol manufacturers to remit excise duty to the Kenya Revenue Authority within a day of moving goods from storage facilities. This was a departure from the previous practice where manufacturers paid duty for the previous month on the 20th day of the following month, resulting in monthly tax remittance.
If approved by legislators, the new proposal, effective next fiscal year, will offer some relief to brewers and distillers who have been burdened with paying taxes before generating sales.
East African Breweries Plc (EABL), controlled by UK’s Diageo and the largest brewer in the region, had attributed a 22.1 percent decline in half-year profits for the period ending December 2023, amounting to Sh6.8 billion, to the daily tax payment requirement.
EABL’s Chief Finance Officer, Risper Ohanga, stated in January that the publicly-traded company had to resort to expensive short-term loans to comply with the demands of the excise duty regime.
“Given the risk of underpayment and subsequent penalties, we are constantly making advance payments and then striving to reconcile figures,” explained Ms. Ohanga.
