New taxes to push up prices of low cost beer
Low cost beer prices will go up as a result of new taxes. PHOTO BY GODFREY LUGAAJU
What you need to know:
- Effect on sales. The Ministry of Finance has proposed an Excise Duty of up to 30 per cent or Shs230 on every litre of opaque (low cost) beer, which breweries such as Nile Breweries say are likely to affect their sales and volumes.
Kampala. The price of opaque (low cost) beer is expected to increase following a proposed new tax imposed on the drink, the new Nile Breweries Limited (NBL) country operations director, has said.
Speaking in a press briefing yesterday, Mr Thomas Kamphuis, said opaque beers such as Chibuku, which seeks to take away people from crude drinks such malwa, will ultimately become expensive if the new tax is implemented.
According to Mr Ian Rumanyika, the Uganda Revenue Authority manager public and corporate affairs, the ministry of Finance has proposed an Excise Duty of up to 30 per cent or Shs230 on every litre of opaque (low cost) beer.
Mr Kamphuis said yesterday the introduction of the levy means that consumers who cannot afford a clear beer will be pushed out of the beer market.
In 2013, NBL introduced Chibuku, a modern but traditional low cost beer brewed out of maize, sorghum and yeast.
Mr Kamphuis said they had hopped for a lot less on that tax partly because they made the investment with the assumption that the category would be untaxed.
“We know that at affordable prices, this category is on high demand,” he said, adding: “If it happens, we will still be able to compete because everybody will have to take their price up to accommodate the higher taxes,” he said.
Mr Rumanyika yesterday told Daily Monitor in a telephone interview that unlike local brews such as ajon, kwete, malwa, Chibuku lies in a different category that attracts tax.
“There is a case in court to determine whether Chibuku is a local beer or not. Until it is disposed of, I cannot comment on it,” he said.
Commenting on how the new pricing would affect volumes, Mr Kamphuis pointed out that selling the beer at the current price with a 30 per cent Excise Duty was unsustainable.
“In anticipation of the tax, we have taken up the price from the recommended retail price of Shs1,000 to Shs1,200 and the volume effect has been devastating. Our volumes are less than a half so if we have to take it up one more time, the volumes will disappear and the product will have to leave the market,’ he said.
No longer exempted
An earlier report by Daily Monitor indicates that Finance minister Matia Kasaija said they gave Chibuku beer tax exemptions to promote the brand and make it sustainable. However, he says, now that the brand is profitable, they are going to charge taxes.
“We gave them exemptions so that they can be able to spread and become profitable. Now that they are profitable, we shall start taxing them,” he said.
