Industrialists seek tax cuts in beer, spirits

Thursday June 14 2018


By Alex Malanga @ChiefMalanga

The Confederation of Tanzania Industries (CTI) has called on the government to improve the business environment for manufactures of beers and spirits.

In the event, the Confederation proposes maintaining the current excise duty rates on beer and spirits, but reduce excise duty on ready-to-drink (RTD) products to Sh765 a litre.

Currently, RTDs are charged as spirits – at Sh3,481 per litre – when they have the same alcohol content as beer: six per cent.

CTI also calls for the removal of the excise duty on beer produced from 100 per cent local raw materials.

“Maintaining the current excise duty structure on beer and spirits would be healthy for the industry and government revenue, as well as for Tanzanian consumers, employees and farmers,” a statement availed to BusinessWeek reads in part.

On the issue of maintaining jobs, Serengeti Breweries Limited (SBL) has a workforce of 800 employees, according to CTI.

The beer industry aids growth of the agricultural sector via contract farming involving with local farmers. As it is, SBL have a network of 300 farmers, which it looks forward to expanding with time.

Further increases of excise duty on beer and spirits would negatively affect prices, leading to declines in sales volumes -- thereby pushing down government revenues.

For instance, excise duty increases have resulted in significant beer market decline in the past, notably in 2013 and 2015.

These fluctuations resulted in the loss of income to farmers and households in the supply chain, as well as encouraging production and consumption of unregulated and potentially harmful alcoholic beverages.

In any case, CTI is optimistic that reduction in excise duty on RTDs would likely lower their prices, thus boosting consumption and sales volumes.

It was also likely to address the problem of illicit alcohol consumption – hence also increasing government revenue from the licensed beverages.

“With a reduced excise tax rate of Sh765, annual sales volumes of RTDs such as ‘Smirnoff Ice Black’ are expected to increase significantly, leading to at least four times the total tax to the government on this product alone” CTI argues in its proposals to the government.

Regarding excise duty on beer produced from 100 per cent local raw materials, CTI says removal of the duty was likely increase demand for beer made from such local raw materials.

It would also reduce consumption of unregulated alcohol.

“Waiver of the excise duty would also support Tanzania’s agro-industrialisation, and allow beer manufacturers to expand their farmers’ programme – thereby promoting the socio-economic wellbeing of farmers and their communities,” CTI optimistically states.