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On Wednesday the 25th of September 2019, the kenyan Parliament approved the Treasury’s request to raise “sin tax” to 21% from the earlier 15% which was proposed in the budget statement.
The bill is currently waiting on approval by the presidency.
The decision is aimed at increasing aims the nation’s tax revenues to cover the Kenya Revenue Authority (KRA)’s deficit.
Following the decision, cigarette manufacturers and beer manufacturers have expressed their dissatisfaction over the 21% excise duty. According to the Kenyan Wall Street, the manufacturers have argued that the new taxes will have severe adverse on other members of the value chain.
Cigarette and Beer manufactures claim that the 21% excise duty will lead massive job duties as it will only affect the wholesalers, retailers, as well as Small and Medium sized Enterprises (SMEs).
The manufacturers also believe that the new taxes will undermine the kenyan government’s initiative to grow the country’s manufacturing sector.
Reports from The Star, Members of Parliament have approved a duty of 12,624 Kenyan Shillings per kilo of cigars containing tobacco or its substitutes.
The legislators in addition, also suggested taxes of 3,787 Kenyan Shillings for every unit of electronic cigarette.
The new bill will charge 3,157 Kenyan Shillings on every mille of cigarettes with filters and 2,272 Kenyan Shillings for every mille of cigarettes without filters in addition.
Liquor manufacturers have not been spared at all by the new excise duty as manufacturers who make liquor through fermenting fruits, such as wine, will pay 189 Kenyan Shillings per litre.
Manufacturers of alcoholic beverages with a concentration of more than 10% of alcohol will pay 253 Kenyan Shillings per litre.
The Kenya Wine Agencies (Kwal), Alcoholic Beverages Association of Kenya (Abak), British American Tobacco and Mastermind Tobacco have already filed a petition against the bill, claiming that Members of Parliament have ignored their appeals.
The manufacturers argue that as was the case in past changes, increasing the taxes will not increase revenues.
According to the petitioners, “Significant and unpredictable excise increases will not reverse this trend. By having the highest excise rates in East Africa, Kenya is already a haven for illicit cartels.”
The petitioners also stated that the new taxes will lead to the stimulation of the growth of illicit products as consumers will seek cheaper alternatives, thus increasing social costs.
A statement from the manufacturers reads, “The further proposed tax increase ultimately widens the existing disparity in excise and prices across the East Africa Community countries, increasing profit margins for illicit traders and in turn increase the supply and availability of illicit products.”
What do you think about the new development? Are you for the 21% excise duty or against? Will you be otherwise affected by this?
Tell us your thoughts.
