Nipate
Forum => Kenya Discussion => Topic started by: gout on November 24, 2014, 11:01:22 AM
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how not to legislate...how not to tax
n 2004 the government granted a remission of 30 % on excise duty on beer made from sorghum, and increased it to 100 % in 2006. This allowed beer made from locally produced sorghum to be sold at Ksh 16. per 300 ml per glass (equivalent of $0.20), approximately the same price as most illicit brews. This was meant to promote the use of locally produced raw materials (sorghum) while encouraging consumers of illicit brew to switch to hygienically prepared beer. This tax break boosted sales of legal beer made from sorghum, and allowed government to collect some of the tax lost from sale of illicit brews. In September 2013, a new tax regime came into force through the Customs and Excise Act that introduced excise duty on beer made from sorghum, millet or cassava at 50% of the rate charged on other beverages on top of the 16% VAT that the beer attracts. This brand of beer from sorghum was initially introduced to woo drinkers of illicit brew to a more hygienically prepared brew.
http://www.tegemeo.org/index.php/component/k2/item/263-findings-on-the-implication-of-excise-duty-on-sorghum-value-chain
Tegemeo says between 2009 and 2012 EABL increased sorghum buying from 474 tonnes to 12,715 tonnes, a 26-fold increase.
The brewer has now cancelled contracts with farmers and at the moment is stuck with 13,000 tonnes of sorghum.
http://www.businessdailyafrica.com/Keg-excise-tax-costs-sorghum-farmers/-/539552/2477300/-/owokri/-/index.html
The new market saw the price of the cereal shoot from Sh7 a kilo in 2009 to Sh24 a kilo in 2012 (far higher than maize in any given harvesting season in Kenya)— making it a highly lucrative cash-crop that yields well in dry-land areas, matures fast, and can also be used as food. The legislation, which came into force in January this year, forced the breweries to raise the cost of the drink substantively— thereby shelving up to 75 percent of its patrons, who abandoned it probably to settle for a cheaper option.
And now, with the remaining 25 percent of the consumers, the breweries says the available stock that was to be used this year can now serve the shrunk market for the next three years.
This is because firms which buy the cereal from farmers to sell to the breweries have now been forced to reduce contracted farmers from 20,000 early this year to 6,000.
According to the government, the main reason for reintroducing the tax was because it was difficult administratively to differentiate between Senator keg and other beers, thereby posing a threat to revenue collection.
Economic analysts have estimated that in the season 2013/14, sorghum farmers have been forced to forgo some Sh180 million, because their cereal was not bought by the breweries.
Generally, Joseph Opiyo, a Senior Research Assistant at Tegemeo institute of Agricultural Policy and Development – Egerton University says that introduction of the tax and subsequent withdrawal of a major buyer in the sorghum value chain has already led to income losses estimated at Sh3.4 billion.
http://www.nation.co.ke/business/seedsofgold/Review-sorghum-beer-tax-/-/2301238/2522708/-/7e4bunz/-/index.html
Rose Mutuku, MD Smart Logistics, which buys the crop from farmers says she started the sorghum business with the intention of supporting farmers from arid and semi arid regions.
“I started with 600 sorghum farmers in 2009/2010 and so far I have contracted over 5,000 farmers. My target was 60,000 farmers by 2015. Now I do not know what to do with the 50 tonnes (50,000 kilos) of sorghum in the store as EABL is no longer buying,” she says, adding that EABL was buying a kilogramme of sorghum at Sh33 while she bought from farmers at Sh27.
http://www.standardmedia.co.ke/m/?articleID=2000142154&story_title=Sorghum-farmers-facing-Sh3b-loss-as-brewers-shy-off-deal-due-to-new-tax
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A sad story indeed for the whole value chain.
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There should be an Administration Act pronto! This is the most lame excuse I have ever encountered in my life. That a mandarin can not tell the difference between two products therefore he taxes both highly! This is extreme administrative prejudice that consumers and citizens must be protected from. It is not the responsibility of the citizen to imbue the mandarin with knowledge on how to tell the difference between non-taxable and taxable products! That is the height of arrogance!
I have no idea why somebody did not go to court to have this tax removed since the mandarins have admitted that they have no intention of levying it but only do it because they find themselves stupid! Let the court determine if official stupidity forms sufficient grounds to impose a heavy unwarranted penalties on citizens.
NB I am still opposed to alcohol but I can't suffer official idiocy and arrogance!
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such a joke ..... but have seen EABL guys grinning during those taxpayers 'awards' day instead of asking hard question or lobbying
There should be an Administration Act pronto! This is the most lame excuse I have ever encountered in my life. That a mandarin can not tell the difference between two products therefore he taxes both highly! This is extreme administrative prejudice that consumers and citizens must be protected from. It is not the responsibility of the citizen to imbue the mandarin with knowledge on how to tell the difference between non-taxable and taxable products! That is the height of arrogance!
I have no idea why somebody did not go to court to have this tax removed since the mandarins have admitted that they have no intention of levying it but only do it because they find themselves stupid! Let the court determine if official stupidity forms sufficient grounds to impose a heavy unwarranted penalties on citizens.
NB I am still opposed to alcohol but I can't suffer official idiocy and arrogance!