Bat Calls for Review of Cigarette Tax

BRITISH American Tobacco Company has faulted the recently introduced tier based excise tax regime on cigarettes saying it is not sustainable for the industry and should be revised. Speaking during the company’s 59th annual general meeting in Nairobi yesterday, the firms management expressed concern over the impact the current excise tax regime could have on its business in the long term. “We need the government to have a clear sustainable position on excise tax. The idea of changing the structure six months after budget reading in December makes it difficult for businesses to forecast,” noted BAT Managing Director Gary Fagan.

The government made amendments to the Finance Bill on December 8, 2010 based on pricing such that low cost cigarettes are charged lower tax.

Previously it was hybrid system where by tax was calculated according to physical components in the cigarette as well as its retail price. BAT warned that revenues for cigarette manufacturers would be compromised over the middle term and product volumes would increase faster than they should in reality if the tier taxation system is maintained.

The company recorded pre tax profit of Sh2.72 billion in financial year ended December 31, 2010, a 30 per cent rise from the previous year’s profits of Sh2.1 billion. BAT lauded the government’s efforts to stop dumping of export goods in the local market and quashing sale of counterfeits.

Recently Kenya Revenue Authority officials together with the police closed down an illegal cigarette factory that manufactured counterfeits. This, BAT said, has managed to completely stop sale of fake Sportsman cigarettes- one of the company’s key brands- in the market.

BAT also commenced exportation of cigarettes and semi processed leaf to Egypt in 2010, a market which it revealed, has performed well and buoyed the overall profits.

In addition, the company told shareholders that it managed to mitigate the high energy costs by using cheaper lighting methods for its premises and factories, use of low energy consuming factory equipment which has led to more cigarettes being produced compared to last year using same amount of energy. The company announced a dividend of Sh14.50 per share.

For the current year the firm is eyeing entry into South Sudan as well as growing its existing markets through enhanced distribution and marketing.

Last year, the firm increased its provisions for liability and charges from Sh353.6 million to Sh983.5 billion partly due to slow moving stock and restructuring cost among others according to its finance director Philip Lopokoiyit.

By Lola Okulo

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