Beer hoarding spikes before excise tax ratification

The anticipated increase on excise tax has led to beer crates shortage at breweries due to sellers hoarding the products, Capital learned.
The revised excise tax is expected to be ratified by the parliament in the near future.
One of the sectors that will be affected by the revised excise tax, which is also known as a sin tax levied mostly on luxury goods and items dangerous to people’s health is the alcohol industry. For instance, for the current budget year the Ministry of Revenue plans to collect 45.4 percent higher excise tax from breweries compared with the preceding year.
The government targets to amass 4.246 billion birr from the brewers in the budget year which is a 1.3 billion birr increase compared with the 2018/19 fiscal year.
Sources at different breweries told Capital that most of them are affected by the shortage of crates (bottle box).
Sources said that currently there is high demand of products in the market but the factories can’t meet their demands because the crates are being returned more slowly than before.
Sources said that sellers in the country on average have a capacity of 1,000 glasses holding, while they seem to be now hoarding more products in their warehouses.
Businesspeople say sellers are holding on to the products a long time before they sell them. When the revised tax law is ratified the price of beer is expected to shoot up. “The distributers are waiting for the law to be ratified, which will bring a huge wind fall sum to their pocket,” they said. They further said that the distributors’ action has forced brewers to slow down their daily production.
The beer industry actors said that some of the brewers are trying their best to get their crates back by applying different tactics.
“For instance, one of the brewers started to give additional bonus crate of beer for those who come up with 15 empty crates,” sources said.
The excise tax, which is expected to contribute about 9 percent of the total tax collection this year, is the oldest tax in modern Ethiopia’s history, first introduced in 1931, before the Italian occupation, on excisable products such as alcoholic beverages, cigarettes, incense, carpets and clothes.
The highly anticipated law is expected to be ratified by the parliament by the coming month, while as the original plan the proclamation was expected to be applicable in November; but it was delayed so far.
As per the draft document Capital was able to look at it appears that taxes on some goods will change and that new products will become eligible for the excise tax but details are not mentioned. Previously an excise tax ranging from 10 to 100 percent was applied to 19 categories of products.
The government is encouraged by international partners like the World Bank and International Monetary Fund to improve tax collection from the current 10 percent of the GDP ratio to at least up to peer countries in the region. In the Sub Sahara region, the average tax to GDP ratio is about 18 percent.