KRA And CAK Scuffle Over Pricing Of Cheap Liquor

Competition Authority Of Kenya has rubbished off KRA orders prohibiting local distillers to sell alcoholic spirits in 250-millilitre containers below Sh150.

According to KRA, the retailers selling spirits at or below Sh150 are tax cheats and illicit brewers who flood the market with deadly drinks. KRA stated that production expenses and duty cost don’t permit alcohol to be sold at that price. A statement that has forced CAK to seek constitutional clarity over the KRA order, pointing out that KRA could have breached sections of the antitrust law.

“We are aware of it (price-setting order) and we have written to KRA to set up a meeting so as to appreciate where they are coming from,” CAK Director-General Wangómbe Kariuki told the Business Daily in an interview.

KRA orders also warned distillers who sell products below Sh150 that their products would be impounded or/and withdraw their operating licenses. This whacks a large generation of consumers of upsurging cheaper spirits like Moonwalker, Jambo Extra, Dallas, meakins just to name but a few…

“Based on our review, products in the market with a selling price below Sh150 per bottle of 250ml at 40 per cent v/v are considered non-compliant in tax based on the minimum cost structure. We request companies to adjust the prices in the current and subsequent tax returns to reflect the correct price benchmark for the alcoholic beverage sector for tax purposes.” KRA says in a letter addressed to distillers.

In the letter, KRA issued a seven-day notice for compliance with the minimum price order.

“KRA intends to commence mop-up of all products sold below the benchmark prices and sanctions imposed on the affected excise manufactures. The mop-up will start after seven days from the date of this letter,” added KRA in reference to the order sent in late October.

Kenya has the highest rates of tax on alcohol as compared to other African States. Here, Spirits are taxed at Sh221.24 per litre or Sh55.31 for the 250-millilitre product.

Tusker lager has a recommended retail price of Sh180 per bottle and Sh55.31 goes to the taxman directly as excise duty. Tax on beer has increased from Sh32.50 per bottle in 2014.

Beer and Spirit heads in Kenya have been thrown once again under the bus. High taxes have pushed almost bankrupt Kenyans to cheap alcohol majority who are illicit drinks.

KRA Commissioner for Domestic Taxes Elizabeth Meyo said the move to set the minimum price would boost tax revenues and help the taxman to clamp down tax cheats.

“As part of compliance monitoring, KRA monitors the prices in the market and any persons putting products in the market that fall below the minimum cost structure are normally targeted for compliance checks. We derive the minimum cost structure from the analysis of the cost of inputs required for the production of a unit of alcohol,” said Ms Meyo.

However, the competition watchdog, CAK, has protested KRA’s orders setting a binding minimum price of Sh150 and the threat to impound products selling below the price.

“Restrictive trade practice which directly or indirectly fixes purchase or selling prices or any other trading conditions in Kenya, or a part of Kenya, are prohibited, unless they are exempt in accordance with the provisions of Section D of this Part,” reads Section 21(1((a) of the law. Part D allows manufacturers to recommend non-binding retail prices.

CAK in 2016 fined British multinational SABMiller Sh2.4 million for engaging in restrictive trade practices by setting minimum prices for its products.

In 2016, Crown Beverages, British SABMiller owned company that sells Redds, Castle, Nile Special, Keringet mineral water, Peroni and Miller was fined Sh2.4 million by CAK for setting the minimum prices for its products.

While KRA focuses more on imposing taxes on Kenyan products, Kenyans who have nothing in their pockets will still go for as cheap as Ksh20 illicit drinks from Uganda and Tanzania flooded on porous Kenyan markets. We are a country that is under the leadership that is focused on taxing more than creating a conduce business environment more fillings of tax returns.