Bar closures deny KRA Ksh.6.3 billion in excise taxes

Bar closures and the limited operations of the establishments has spilled Ksh.6.3 billion from the Kenya Revenue Authority (KRA) pool of excise revenues.

New data from the 2021 Economic Survey shows excise revenue levied on beer, wines and spirits fell to Ksh.34.8 billion from Ksh.41.4 billion in 2019.

Excise taxes raised from beer were hit severely having fallen from Ksh.27.8 billion to Ksh.19.1 billion.

The significant dip in excise duty from beer is largely a factor of the concentration of beer consumption in bars and other brick and mortar entertainment joints.

On the flip-side, excise revenue collections from wines and spirits defied the decline trend having risen by 15.4 per cent to Ksh.15.7 billion from Ksh.13.6 billion in 2019.

The resilience in excise revenues from wines and spirits is highly attributable to the increased consumption of the category of alcoholic beverages whose sale has mainly been carried out in non-traditional hubs including wines and spirits shops whose operations remained largely unaffected in 2020.

Data from the East African Breweries Limited (EABL) has shown a rising preference for the wines & spirits category, especially gin which has registered increased popularity especially among women.

While the government has subsequently raised part of restrictions on bars and other entertainment joints, the operations of the establishments remains constrained with bars and nightclubs for instance mandated to close by 7pm.

This means that KRA will likely rely on excise taxes from wines and spirits as collections from beer related sales dwindle.

Total excise revenue levied on commodities and services in 2020 fell by 12.1 per cent to Ksh.102.7 billion from Ksh.116.9 billion.

This from additional dips in commodity lines such as cigarettes and services such as financial transactions which yielded lower excise taxes on the back of the waivers on some transactional costs.

KRA nevertheless marked more increases in excise revenue levied on airtime, mineral water, soft drinks and juices.