The Finance Bill exempted alcohol and cigarettes from excise duty changes, despite the fact that neither commodity had seen a tax increase in the last five years.
Both producers and consumers will be relieved. President Uhuru Kenyatta’s administration imposed back-to-back tax increases on the “sin business,” which encompassed the two products as well as betting and luxury goods, in order to raise more money.
For many years, it was assumed that alcohol and cigarettes were price inelastic, which meant that price changes in either direction had no effect on consumption. As a result, they were ideal candidates for tax avoidance.
Cigars now cost Sh15,296.60 instead of Sh13,906.04, while liquor with an alcohol level of more than 6% now cost Sh335.30 a litre as opposed to Sh287.70.
The excise duty increases from the previous year were targeted at filtered and ordinary cigarettes, as well as tobacco substitutes including nicotine pouches and e-cigarettes.
Excise receipts for alcohol, cigarettes, and beer have begun to level out, a sign that higher tax rate collections had peaked.
According to the 2023 Economic Survey, beer excise receipts declined to Sh27.34 billion from Sh28.61 billion in 2021 while duty revenue from wines and spirits increased to Sh18.97 billion from Sh16.99 billion. Cigarette excise collections for the time period remained steady at Sh11.76 billion.
The price of low-end alcoholic beverages increased last year as a result of the implementation of an excise levy of Sh105.20 per litre on low-alcoholic strength beverages.
Tax analysts regarded the behavior as an illegal inducement to consume alcohol.
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