TANZANIA - An excise duty rise on beer and spirits can lead to an increase in the consumption of illicit brews and subsequent reduction in company earnings and government revenues, brewing industry players warn.
Serengeti Breweries Limited (SBL) corporate relations director John Wanyancha said the excise duty on beer and spirits is normally passed on consumers.
When it is high the prices increase. But consumers failing to afford the drink turn to illicit brews.
"That can impact negatively on brewing companies as volume sales may decrease, with subsequent fall in government revenues."
He warned that the consumption of illicit brews could endanger health.
He called on the government to maintain the tax concession on local raw materials.
According to him, currently beer companies that source all their raw materials locally are given a 40 per cent tax concession compared with beers that are produced from foreign materials.
He called on the government to maintain that to foster growth of agriculture.
"This encourages more people to grow, barley, wheat, maize and millet because they are assured of a ready market."
Tanzania Breweries Limited (TBL) officials were not available to comment on the matter.
Meanwhile the Confederation of Tanzania Industries (CTI) supports SBL that an increase in excise duty on beer and spirits could lead to increases in consumer prices, resulting in reduced sales volumes.
According to a CTI report, a 25 percent increase in beer excise duty in 2012/13 resulted in an 8 percent loss in sales volume and revenue for the company and the government respectively. It encouraged people to consume "unregulated and unhealthy alcohol", it warned.
CTI proposed that the government maintain excise duty rates on beer and spirits on the current inflation rate.
According to them, maintaining current prices of beer and spirits will increase government revenue estimated at Sh65 billion a year.
CTI said past experiences showed that a 5 percent volume growth resulted in a 15 percent increase in the total product tax collected.
The report shows that TBL paid more than Sh380 billion in taxes in 2015, preventing consumption of unhealthy and unregulated alcohol.
Employment of over 2 million people can be maintained through the production and supply chain as well as support agriculture via contract farming.
June 12, 2017: The Citizen