The Kenya Revenue Authority (KRA) has taken a significant step to promote fairness in pricing in the alcoholic beverage industry with its recent amendment to the 2010 Alcoholic Drinks Act. In the new clause mandated by the Finance Act, the KRA has been empowered to establish a minimum input cost price for alcoholic drinks through gazette notices, effectively preventing the sale, manufacture, or distribution of such beverages below this threshold. This policy has far-reaching implications for the industry and consumers, aiming to strike a balance between promoting fair competition and protecting public interests.

The recent amendment introduced by the KRA reflects the government’s commitment to address the manufacture, sale, and consumption of illicit alcoholic beverages. The government has had to grapple with challenges resulting from this bootleg market such as tax revenue loss, market distortions, and public health concerns. 

Illicit alcohol has garnered significant popularity in the market owing to its inexpensive nature. This popularity has resulted in a growing underground economy, causing a significant dent in tax collections and hampering government initiatives. According to a recent report by Euromonitor Consulting, the government loses about Sh71 billion ($506 million) in taxes annually from the sale of illicit alcohol. Tax evasion by manufacturers of illicit alcohol allows them to offer products at unfairly low prices, distorting the market and disadvantaging compliant industry players. The proliferation of cheaper illicit beverages undermines the ability of legitimate manufacturers to compete fairly, eroding their market share and jeopardising their sustainability. 

Additionally, illicit alcoholic beverages, often produced under unregulated conditions, pose serious health hazards due to potential contamination, unsafe production methods, and the misuse of ingredients such as methanol which has the potential to cause perdurable damage. The availability of cheap and substandard alcohol leads to increased consumption, promoting harmful drinking patterns, alcohol-related illnesses, and social problems within communities. 

The introduction of a minimum input cost price by the KRA ensures that alcoholic beverages cannot be sold below a specified threshold, discouraging the production and sale of illicit alcohol. By setting a benchmark for input costs, the amendment strengthens tax enforcement measures and reduces opportunities for tax evasion within the industry. The amendment acts as a safeguard against the proliferation of substandard and potentially harmful alcoholic beverages, promoting fair competition among manufacturers and sellers, and creating a healthier business environment that rewards quality and innovation rather than undercutting prices. 

The situation presents an opportunity for KRA to collaborate with law enforcement agencies and other stakeholders such as the Kenya Bureau of Standards (KEBS), The National Authority for the Campaign Against Alcohol and Drug Abuse (NACADA), and the National Bar Owners Association to enhance monitoring and inspection mechanisms to identify and penalise manufacturers involved in the production and distribution of illicit alcohol. Educating the public about the risks associated with illicit alcohol consumption and the benefits of purchasing legitimate, regulated products can help drive consumer demand towards compliant manufacturers. The recent amendment of the 2010 Alcoholic Beverages Act is integral to achieving a thriving, regulated, and responsible alcoholic beverage industry in the country.