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Private sector players now fear tax increases have reached a tipping point and will likely decimate value chains for farmers and small and medium enterprises serving big manufacturers.

For instance, East African Breweries Limited (EABL) reported a one per cent drop in the volume of beer in its half-year results, attributed to the tax increase, which forced the company to pass it on to consumers.

Industry data shows excise tax rise on alcoholic beverages has resulted in a 100 per cent increase in the price of beer over the past 10 years with the industry’s ‘sin taxes’ viewed as the soft target by the Treasury.

However, with Kenya’s excise tax rates higher compared to other countries in the region, policy experts now warn that tax policy is increasingly becoming counterproductive.

Kenya’s Excise Duty is more than 400 per cent higher than Tanzania’s and more than 300per cent higher than that in Uganda, which places the country at a disadvantage and encourages smuggling across borders.

According to Alcohol Beverages of Kenya (ABAK) chairman, Gordon Mutugi, There is every likelihood of the return of illicit brews because consumers buying our products can no longer afford them and are resorting to informal alcohol which the government cannot collect taxes from.

“Our industry is facing near collapse on the back of a persistent increase in excise tax. The government will have to think very hard about broadening the tax band, rather than ruining gains m

ade in our industry over the years,'' Mutugi said.