Kenya’s finance bill 2025 sparks industry concerns over excise duty, tax loss caps and data privacy
Alcohol producers say new tax changes could fuel illicit trade, disrupt investment, and reduce competitiveness of local manufacturers.
KENYA – Kenya’s alcoholic beverages industry has raised alarm over proposed provisions in the Finance Bill 2025, warning that the measures could harm manufacturing competitiveness and unintentionally stimulate the illicit alcohol trade.
At the heart of the concern is a proposed amendment to reduce the excise duty on undenatured extra neutral alcohol (ENA) from KES 500 (US$3.87) to KES 250 (US$1.94) per litre. ENA is a key ingredient in spirit production.
While industry players such as the Alcoholic Beverages Association of Kenya (ABAK) and Kenya Breweries Ltd (KBL) welcomed the shift to a volume-based excise system from an Alcohol by Volume (ABV) approach, they say the new rate remains high compared to regional benchmarks.
KBL pointed out that Kenya’s proposed ENA rate is 5.6 times that of Uganda, which currently charges KES 88.64 (US$0.69) per litre. Tanzania’s rate stands at KES 239.29 (US$1.85). The company stated that the disparity negatively impacts cash flow and makes local manufacturing less competitive.
KBL further warned that such a gap could incentivise the smuggling of ethanol into Kenya, worsening the problem of illicit alcohol.
According to a recent report by Euromonitor International, commissioned by ABAK, ethanol smuggling accounts for 81,455 hectolitres of pure alcohol annually—seven per cent of the country’s illicit alcohol volume. The illicit trade is valued at KES 23 billion (approximately US$177.99 million), with an estimated tax loss of KES 9 billion (approximately US$69.7 million).
The study also found that illegal alcohol constitutes 60 per cent of Kenya’s total alcohol market by Litres of Alcohol Equivalent, growing by 27 per cent since 2022.
Another contested clause is Section 8(C), which proposes to cap tax loss carry-forward to five years, down from the current indefinite period. Industry stakeholders argue this would hurt capital-intensive companies that accumulate tax losses due to large investments and capital allowances.
KBL indicated that businesses recovering from previous losses would be disproportionately affected, especially if they have entered profitability but still carry historical tax deficits.
The clause would further place Kenya at a disadvantage against Tanzania and Uganda, which allow indefinite and seven-year carry-forward periods, respectively.
Additional proposals drawing criticism include the removal of Section 15(2)(Z), which permits tax deductions for sports sponsorships.
KBL argues this could reduce private sector support for sports, undermining government commitments to youth development under the Bottom-Up Economic Transformation Agenda (BETA).
Manufacturers are also opposing the proposed deletion of Section 59A(1B) of the Tax Procedures Act, which currently restricts the Kenya Revenue Authority (KRA) from accessing trade secrets and private customer data.
KBL warned this could breach data privacy laws and international agreements, jeopardising investor confidence.
Finally, the industry is lobbying for a one per cent spirits process and transit loss allowance, citing natural losses and international best practices from the US, Europe, UK, and South Africa.
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