Home Business Illicit alcohol trade denies government Kshs 71B in annual taxes

Illicit alcohol trade denies government Kshs 71B in annual taxes

Kenya loses an average of Kshs. 71 Billion in taxes annually as a result of the proliferation of the sale of illicit alcohol in the country.

This is according to a report released by Euromonitor Consulting which was commissioned by the Alcoholic Beverages Association of Kenya (ABAK) on the impact of illicit alcohol on the Kenyan economy.

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The report also reveals that the volume of illicit alcohol sales has recorded strong growth in value since 2020 to stand at Kshs. 67 billion, reflecting its wider distribution and increased preference, especially in low-income settlements.

The popularity of illicit alcoholic beverages which are often sold at a lower price than legal drinks, has been fuelled by the non-compliance with tax and excise regulations.

The low price of illicit drinks, high taxes, costly raw materials to produce safe alcohol, as well as easy accessibility through street vendors, licensed liquor shops, grocery retailers, bars, and other hospitality outlets, has been cited as one of the reasons why illicit alcohol has become more affordable.

The main target for counterfeiting is the mass-market, high-volume brands that comprise a mix of mid-market and premium spirit brands followed by high-quality cider and beer. Illegal traders are also interested in ethanol, driven by increasing demand from illicit commercial alcohol manufacturers.

Quinton Walker, a Senior Consultant at Euromonitor International noted the presence of weak border patrols, widespread corruption, and unmanned entry points along Kenya’s borders continue to provide a safe passage for illegal traders to conduct their business.

“Illicit ethanol traders have resorted to smuggling ethanol into the country taking advantage of rising local ethanol demand, price differences and higher ethanol availability in Tanzania and Uganda. The most preferred border routes are Isibania and Shimoni (Kenya-Tanzania), Mbale and Busia (Kenya-Uganda) and Moyale (Kenya-Ethiopia) are popular routes.” Walker noted.

The report proposes the enforcement of the law to make it illegal for any person who involves himself in the production, distribution, or sale through licensed or unlicensed outlets will be considered criminal activity and be subject to punishment by the law.

It also calls for more consumer awareness campaigns on the dangers of consumption of illegal alcohol highlighting the health effects on the human body. This will act as a deterrent and help reduce engagement in illicit alcohol production.

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