Kenya: BAT Warns Against Further Excise Raise

Source from:  The Star  03/04/2014

British American Tobacco on Friday issued a rallying plea to the government not to increase excise duty on the stimulant, arguing this would destablise its operations.

The cigarette maker wants the duty retained at the present average of 55 per cent. Chris Burrell, chief executive for East and Central Africa, said doing so would hurt the besieged cigarette market and government revenues as a result. Cigarettes and beer contribute about 90 per cent of government revenue realised from excise taxes. Early February, participants at a public pre-budget forum in Nairobi urged the government to increase the excise duty on cigarettes to 70 per cent in the next financial year in line with World Health Organisation's recommendation.

BAT said in a full-year financial statement on Friday that it paid a total of Sh12.3 billion in excise and VAT levies to the government last year -- a 10.83 per cent rise from the Sh11.1 billion paid in 2012. Burrell argued that the current excise duty regime should remain since government revenues are growing at rates above inflation. "As the industry grows so does the government revenue and so it's a winwin for both," he said.

"When you consider manageable, and not desirable levels in the market, and the satisfaction growth in government revenue, the government strategy in excise taxes can be considered to be a success."

The NSE-listed firm posted a 13.85 per cent growth in net profits to Sh3.72 billion in 2013 compared to Sh3.27 billion a year earlier, largely on a drop in operating and capital expenditure costs. BAT scaled down expenditures on investment by 19.33 per cent to Sh968 million and financing costs by 13.26 per cent to Sh2.9 billion. Net earnings rose despite excise and VAT levies. Enditem