Competition Authority of Kenya has come to the rescue of distillers after KRA illegally ordered them not to sell alcoholic spirits in 250 ml containers for not less than below Ksh150. The distillers were warned against selling spirits at below Sh150 failure to which they would face punishments that include withdrawing their operating licences and impounding their products, forcing the manufacturers of drinks targeted at the low-end market to increase their prices.
According to the Competition Authority, the KRA order breaches sections of the antitrust law that bars the setting of binding prices, and they have sought to clarify the issue, pegging its concerns on the restrictive trade clause, which bars the setting of binding prices.
“Restrictive trade practice which directly or indirectly fixes purchase or selling prices or any other trading conditions in Kenya, or a part of Kenya, are prohibited unless they are exempt in accordance with the provisions of Section D of this Part which allows the manufacturers to recommend non-binding retail prices,” read the section.
KRA issued a seven-day notice for compliance with the minimum price order, requesting the companies to adjust the prices in the current and subsequent tax returns to reflect the correct price benchmark for the alcoholic beverage sector for tax purposes.
Spirits are taxed at Sh221.24 per litre or Sh55.31 for the 250 ml product, which is the minimum package allowed in the Kenyan market. From 2014 tax has nearly doubled from Sh120 in 2014, cementing Kenya’s position of having one of the highest rates of tax on alcohol on the continent.
The Taxman said that setting the minimum spirits prices will “level the playing field” for dealers, arguing that cheap liquor has disadvantaged some players like EABL in a market where the price is a market share driver, especially in the low-income segment.