Lawmakers have cut proposed duty on nicotine pouches by 76 percent offering a boost to British American Tobacco (BAT) #ticker:BAT in its plan to earn Kenya Sh1.5 billion annually in exports of the commodity.
The parliamentary Finance and National Planning Committee has proposed to slash the Sh5,000 per kilo of oral nicotine pouches – consumed by placing between upper lip and gum – fronted by the Treasury to Sh1,200.
The committee, chaired by Gladys Wanga (Homa Bay), wrote in its report for debate and approval by the House, that the reduced duty will help grow the fledgling industry which BAT argues is a “safer alternative to cigarettes”.
“This is so as to allow the growth of the industry being that it’s a new investment,” the parliamentary committee says.
“BAT has already invested in a new factory that is projected to deliver Sh7.5 billion in export revenue from Africa and beyond over the next five years, realise Sh1.5 billion in import duty from raw materials and support close to 50,000 Kenyan business within the value chain and over 80 additional direct jobs for Kenyans.”
Kenya Association of Manufacturers, a sector lobby, and Westminister Consulting, a consultancy, had in separate petitions to the parliamentary committee backed BAT’s push for a cheaper duty of Sh757 per kilo.
“The tobacco-free nicotine containing oral pouches are a new product category that is only available in a limited number of countries,” KAM wrote.
The move to lower the duty on the pouches, if upheld by the House, will likely irk public health officials and lobbies such as such as International Institute for Legislative Affairs which have called for a high taxation and restrictive marketing regime.
Health Secretary Mutahi Kagwe in February ruled the BAT nicotine pouches, selling under Lyft brand, be subjected to Tobacco Control Act.
This restricts marketing campaigns such as promotions and advertising on the product as is the case with cigarettes and other tobacco products.
BAT Kenya managing director Crispin Achola has, however, contested the directive, arguing the pouches are “a safer alternative to cigarettes” which are linked to increased risk of contracting life-threatening diseases such as cancer as well lung and heart diseases.
BAT Kenya has completed $25 million (Sh2.7 billion) nicotine pouches factory in Nairobi, but a fallout with Health ministry over an appropriate regulatory regime has delayed its commissioning.