HK, Pundit which indigenous company will survive?

[Higgins the genius]

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https://www.the-star.co.ke/news/2019-08-21-dpp-orders-keroche-directors-tabitha-karanja-and-husband-to-appear-in-court-over-sh14bn-tax-evasion/
Is EAVL Fighting back? Why is KRA keen on liquor industry ? Are the big fish importing alcohol that they want to finish local players?

[hk]

KRA new commissioner from NIS is wrecking havoc in the industry. The main problem with alcohol industry in Kenya is overtaxation. KRA taxes ethanol but more importantly taxes spirits  pegged on the alcohol content. Anything above 10% alcohol/volume is taxed at 20%. So the likes of kerochee their profit driver is vienna vodka ice is labeled at 7.5% but its probably 15%. In short its not worth it to manufacture alcohol in kenya due to stupid regulations and overtaxation. Hell even centum tapped out the other day. Its far much easier to set up a factory in uganda or TZ then import finished products. This is what happens when government is hell bent to tax everything hoping to collect taxes to fund huge budgets. You can't tax your way to prosperity.
They're busy killing an industry which can be an economic driver due to already large local market. SA taxes alcohol at very low rates, no wonder they have a serious wine, cider, beer and spirits industry. They're busy exporting to the rest of africa and asia.

[RV Pundit]

You makes a lot of senses. Uganda and TZ beer are ridcioulsy cheaper. But I think KRA has to do their job. It's upon parliament to stop this over-taxation. KRA need to enforce the law as is. Now parliament and treasury - need to sit down - and review some of these taxations.

KRA new commissioner from NIS is wrecking havoc in the industry. The main problem with alcohol industry in Kenya is overtaxation. KRA taxes ethanol but more importantly taxes spirits  pegged on the alcohol content. Anything above 10% alcohol/volume is taxed at 20%. So the likes of kerochee their profit driver is vienna vodka ice is labeled at 7.5% but its probably 15%. In short its not worth it to manufacture alcohol in kenya due to stupid regulations and overtaxation. Hell even centum tapped out the other day. Its far much easier to set up a factory in uganda or TZ then import finished products. This is what happens when government is hell bent to tax everything hoping to collect taxes to fund huge budgets. You can't tax your way to prosperity.
They're busy killing an industry which can be an economic driver due to already large local market. SA taxes alcohol at very low rates, no wonder they have a serious wine, cider, beer and spirits industry. They're busy exporting to the rest of africa and asia.

[hk]

You makes a lot of senses. Uganda and TZ beer are ridcioulsy cheaper. But I think KRA has to do their job. It's upon parliament to stop this over-taxation. KRA need to enforce the law as is. Now parliament and treasury - need to sit down - and review some of these taxations.

KRA new commissioner from NIS is wrecking havoc in the industry. The main problem with alcohol industry in Kenya is overtaxation. KRA taxes ethanol but more importantly taxes spirits  pegged on the alcohol content. Anything above 10% alcohol/volume is taxed at 20%. So the likes of kerochee their profit driver is vienna vodka ice is labeled at 7.5% but its probably 15%. In short its not worth it to manufacture alcohol in kenya due to stupid regulations and overtaxation. Hell even centum tapped out the other day. Its far much easier to set up a factory in uganda or TZ then import finished products. This is what happens when government is hell bent to tax everything hoping to collect taxes to fund huge budgets. You can't tax your way to prosperity.
They're busy killing an industry which can be an economic driver due to already large local market. SA taxes alcohol at very low rates, no wonder they have a serious wine, cider, beer and spirits industry. They're busy exporting to the rest of africa and asia.

Treasury proposes taxation that's approved by parliament. The other day KRA via treasury proposed doing away with TOT i.e turnover tax rate for small businesses and instead tax licenses. They collected less taxes and now want to revert to the old TOT. When KRA came up with a flat 10% gross of rental income they have more than doubled the collection from landlords. KRA should have a low flat tax rate and everyone would comply. Besides this would lead to increased manufacturing in the sector where actual distillers(even changaa distillers) and brewers excel.  In 2015 uhuru went on rampage supposedly fighting illegal alcohol but the industry became more informal. Instead of addressing unemployment and low productivity in mt.kenya region he thought closing distillers and bars would solve mt.kenya problems. The problem still persists or its even worse.

[RV Pundit]

Parliament Budget office led by Ichungway needed to be seized of these issues. Treasury and KRA do not make laws. It parliament now who receives the proposal, amend and approve tax proposals. Most Mps do not have the capacity. There is need to build research and policy into parliamentary budget processes...and for them to listen to industry players.

But anybody cutting corners - by installing fake pipes...need to be bankrupted. Anybody cutting corners - need to pay heavy prices.

Treasury proposes taxation that's approved by parliament. The other day KRA via treasury proposed doing away with TOT i.e turnover tax rate for small businesses and instead tax licenses. They collected less taxes and now want to revert to the old TOT. When KRA came up with a flat 10% gross of rental income they have more than doubled the collection from landlords. KRA should have a low flat tax rate and everyone would comply. Besides this would lead to increased manufacturing in the sector where actual distillers(even changaa distillers) and brewers excel.  In 2015 uhuru went on rampage supposedly fighting illegal alcohol but the industry became more informal. Instead of addressing unemployment and low productivity in mt.kenya region he thought closing distillers and bars would solve mt.kenya problems. The problem still persists or its even worse.

[hk]

Parliament Budget office led by Ichungway needed to be seized of these issues. Treasury and KRA do not make laws. It parliament now who receives the proposal, amend and approve tax proposals. Most Mps do not have the capacity. There is need to build research and policy into parliamentary budget processes...and for them to listen to industry players.

But anybody cutting corners - by installing fake pipes...need to be bankrupted. Anybody cutting corners - need to pay heavy prices.

Treasury proposes taxation that's approved by parliament. The other day KRA via treasury proposed doing away with TOT i.e turnover tax rate for small businesses and instead tax licenses. They collected less taxes and now want to revert to the old TOT. When KRA came up with a flat 10% gross of rental income they have more than doubled the collection from landlords. KRA should have a low flat tax rate and everyone would comply. Besides this would lead to increased manufacturing in the sector where actual distillers(even changaa distillers) and brewers excel.  In 2015 uhuru went on rampage supposedly fighting illegal alcohol but the industry became more informal. Instead of addressing unemployment and low productivity in mt.kenya region he thought closing distillers and bars would solve mt.kenya problems. The problem still persists or its even worse.

Keroche biggest competitor isn't EABL its the informal and blackmarket . EABL is addressing a different market and they have a sweetheart deal with treasury where they compete head to head with keroche and other local producers. Their low market product is keg which is taxed at 80% lower than local producers products. This is essentially the problem, government picking out the winners in a market place. Getting the exemption from treasury means greasing the treasury mandarins without surety that exception would be granted. Grant keroche and the local producers the same taxation rate as keg and compliance would be 100%. This is the problem.

[RV Pundit]

Now that makes sense.Same rules for everybody

[vooke]

I once read of a KRA dispute with Keroche. Keroche was importing spirits and diluting  them. They paid excise duty before diluting which means they paid less. I think this could also be a factor though I hear there is an ongoing dispute with KRA themselves.

[hk]

I once read of a KRA dispute with Keroche. Keroche was importing spirits and diluting  them. They paid excise duty before diluting which means they paid less. I think this could also be a factor though I hear there is an ongoing dispute with KRA themselves.

Actually all so called local distillers including UDV EABL subsidiary that deals with spirits, import ethanol ( ethly alcohol or grain alcohol) which is 90% pure then they "cut it" dilute to 40% then they flavour it to either vodka or brandy. The only true distillers in kenya are the changaa producers and london distillers but they also import ethanol. Ethanol import duty in kenya is ksh200 per litre, after diluting the company is suppose to pay excise duty of between 20% to 100% depending on alcohol content.  That's why a black market is there and compliance is low.

[vooke]

I once read of a KRA dispute with Keroche. Keroche was importing spirits and diluting  them. They paid excise duty before diluting which means they paid less. I think this could also be a factor though I hear there is an ongoing dispute with KRA themselves.

Actually all so called local distillers including UDV EABL subsidiary that deals with spirits, import ethanol ( ethly alcohol or grain alcohol) which is 90% pure then they "cut it" dilute to 40% then they flavour it to either vodka or brandy. The only true distillers in kenya are the changaa producers and london distillers but they also import ethanol. Ethanol import duty in kenya is ksh200 per litre, after diluting the company is suppose to pay excise duty of between 20% to 100% depending on alcohol content.  That's why a black market is there and compliance is low.

Got it
KRA basically arbitrarily declared that Keroche had been selling spirits and declaring them as wines. Wines attracted duty of 45% while spirits had 60%. They slapped them with arrears plus penalties amounting to 1.4B. This wa snack in 2005.
http://kenyalaw.org/caselaw/cases/view/39144

[Georgesoros]

KRA new commissioner from NIS is wrecking havoc in the industry. The main problem with alcohol industry in Kenya is overtaxation. KRA taxes ethanol but more importantly taxes spirits  pegged on the alcohol content. Anything above 10% alcohol/volume is taxed at 20%. So the likes of kerochee their profit driver is vienna vodka ice is labeled at 7.5% but its probably 15%. In short its not worth it to manufacture alcohol in kenya due to stupid regulations and overtaxation. Hell even centum tapped out the other day. Its far much easier to set up a factory in uganda or TZ then import finished products. This is what happens when government is hell bent to tax everything hoping to collect taxes to fund huge budgets. You can't tax your way to prosperity.
They're busy killing an industry which can be an economic driver due to already large local market. SA taxes alcohol at very low rates, no wonder they have a serious wine, cider, beer and spirits industry. They're busy exporting to the rest of africa and asia.

Govt needs to cut a deal and let them pay a portion. Be aggressive but if it is not a deliberate tax avoidance then cut a deal. Many people have not paid their taxes, and they thought they'll get away with it.
On the other hand parliament can give a 90day amnesty for all cheaters to come out and pay.

[Georgesoros]

Parliament Budget office led by Ichungway needed to be seized of these issues. Treasury and KRA do not make laws. It parliament now who receives the proposal, amend and approve tax proposals. Most Mps do not have the capacity. There is need to build research and policy into parliamentary budget processes...and for them to listen to industry players.

But anybody cutting corners - by installing fake pipes...need to be bankrupted. Anybody cutting corners - need to pay heavy prices.

Treasury proposes taxation that's approved by parliament. The other day KRA via treasury proposed doing away with TOT i.e turnover tax rate for small businesses and instead tax licenses. They collected less taxes and now want to revert to the old TOT. When KRA came up with a flat 10% gross of rental income they have more than doubled the collection from landlords. KRA should have a low flat tax rate and everyone would comply. Besides this would lead to increased manufacturing in the sector where actual distillers(even changaa distillers) and brewers excel.  In 2015 uhuru went on rampage supposedly fighting illegal alcohol but the industry became more informal. Instead of addressing unemployment and low productivity in mt.kenya region he thought closing distillers and bars would solve mt.kenya problems. The problem still persists or its even worse.

Keroche biggest competitor isn't EABL its the informal and blackmarket . EABL is addressing a different market and they have a sweetheart deal with treasury where they compete head to head with keroche and other local producers. Their low market product is keg which is taxed at 80% lower than local producers products. This is essentially the problem, government picking out the winners in a market place. Getting the exemption from treasury means greasing the treasury mandarins without surety that exception would be granted. Grant keroche and the local producers the same taxation rate as keg and compliance would be 100%. This is the problem.

Agreed...
Keroche needs to be aggressive and fight it.