“How Cross Border Beer Smuggling Is Hurting Revenue Collections In Kenya and Uganda”

By PATRICK JARAMOGI

BUSIA- UGANDA- Cross border Bar owners, businessmen and women in the Ugandan border town of Malaba and Busia and their counterparts in Kenya are taking advantage of the porous border points and weak legislations to evade tax by smuggling Ugandan ‘cheap’ beers into Kenya.

Our investigations revealed that the vice that has been going over the years is escalating amidst little attention by both nations leading to substantial consequences such as reported low development in the communities neighboring both nations.

Joselyn Nafula aged 37, a single mother of six, who operates a makeshift bar at Busia border in Uganda said: “The Ugandan beer is preferred to the Kenyan one because it’s much cheaper. At times several Kenyans cross into Uganda to consume this beer before crossing back into Kenya, that is why we are forced to smuggle the Ugandan beer into Kenya where it is sold by our friends across.”

The illicit cross-border smuggling of beer is costing Kenya millions of dollars due to the loss of potential taxes.

The issue of cross border beer smuggling has not only affected revenue collection from both the Uganda Revenue Authority in terms of excise duty from exports, and the Kenyan Revenue Authority in terms of income tax, it has also led to many injuries among those nabbed as they engage in the trade interfacing with the cross-fire from security and anti-smuggling forces.

Our investigations established that beer on the Ugandan side of the Malaba and Busia goes for almost half the price sold in the other towns of Bungoma, Kanduyi, Kakamega, Mumias and Eldoret on the Kenyan side.

A beer from Uganda costs UGX3000- 3,500 (USD $0.8- $0.9) yet the price of Kenyan beer goes for between Ksh200-400 (USD$1.8- $3.6).

Kijjana Leo a beer business trader in Bungoma said: “We have registered reduction on our beer sales due to the big price difference between our (Kenyan) beer and the beer from Uganda.

“We are left with no option but to get the smuggled cheap Ugandan beer so as to remain in business,” he noted.

Uganda Revenue Authority boss Doris Akol pointed out that the sister states were trying to abet the problem by harmonizing the tax laws and tax rates, something that analysts say will take some time to solve.

Kenya’s Revenue Authority (KRA) officials revealed that addressing the issue of illicit beer trade would be hard to contain due to the current tax differences on excise duty between the two nations.

Mr. James Githii Mburu Kenya Revenue Authority Commissioner General said the issue of addressing illicit alcohol smuggling that has caused untold tax evasion and colossal loss of tax revenues will be sorted out with the introduction of the electronic tax stamps.  He said those who have been trading in illicit sales of beverages without paying taxes, have no room for such trade anymore.

According to KRA statistics, Kenya loses over Ksh 4 billion (US$ 3.7million) in illicit trade and tax evasion annually.

Busia District Resident District Commissioner said the loss of tax revenue due to these smuggling is huge and has caused untold suffering to the communities living along the two border points.

“The fact that smuggling is thriving, and no taxes are collected by both governments, the locals within these border outlets continue to leave in uttermost poverty with no or little access to health facilities and learning centers for their children,” he said.

Mr. Charles Muchene, the Group Chairman East African Breweries Limited (EABL), East Africa’s leading beer manufacturer with concessions in Kenya, Tanzania, and Uganda revealed that Kenya is suffering huge tax losses due to increase in both beer and spirits imposed by the Kenyan government in the recently introduced Finance Bill.

“The recent Finance Bill presented by the Treasury Cabinet Secretary in Kenya proposed significant excise increase in both beer and spirits (5.2% in beer and 15% in spirits). This will be the first time that the government is increasing excise duty in Kenya for two years in a row. While we acknowledge the need for government to grow its revenue, we are sensitive that this will impact consumers’ ability to afford our products, thus potentially drawing more of them to the consumption of illicit and smuggled alcohol,” said Muchene.

He said EABL would continue to engage with relevant stakeholders in pursuit of a truly integrated East African Community, with free movement of goods and people across borders in order to catalyze sustainable economic growth in the region.

“This article was developed with the support of the Money Trail Project  (www.money-trail.org).”