Cross-border smuggling jitters as Kenya effects new stamp fees

Manufacturers have raised concerns over a new wave of cross-border smuggling of fast-moving excisable goods such as beer, cosmetics and fruit juices after Kenya raised the cost of stamps.

This is after Treasury gazetted the Excisable Goods Management System (Amendment) Regulations, 2023, effectively raising the prices of stamps by between 78 percent and 317 percent.

Treasury has authorised the Kenya Revenue Authority to start charging the new fees despite protests from manufacturers who had argued the new prices will spur trade in counterfeited spirits, wines, beer, cosmetics and fruit juices.

Read: Listen to industry views on the excise stamp fees

“It is important to note that the excise stamps fees in Kenya are already amongst the highest, compared to the rates for the same category of excisable goods in other jurisdictions across sub-Sahara Africa and globally,” tax consultants at PricewaterhouseCoopers (PwC) wrote in an alert to clients on Wednesday.

“Further the increase in fees makes excisable goods in Kenya more expensive in comparison to similar goods in the East African region, which is bound to encourage incidences of cross-border smuggling and trade in illicit goods.”

All new prices proposed in the draft have been adopted in the final rules, except for spirits of alcoholic strength exceeding six percent whose excise stamps cost has been cut to Sh3 from Sh5 earlier proposed, but still higher than the Sh2.8 price before changes.

The price raises will hit cosmetics hardest where the stamp fees will surge more than three-fold to Sh2.50 per unit followed by fruit juices and non-alcoholic beverages such as sodas in plastic bottles where the cost will climb 267 percent to Sh2.20 per stamp.

Read: Treasury plots 300pc stamp tax hike on alcohol, makeup

The cost of a stamp affixed on a beer bottle will double to Sh3 from Sh1.50, while those for spirits, wines and tobacco products are set for a 79 percent rise to Sh5 from the current Sh2.80 per stamp.

The new rules have spared mineral water where excise stamp prices have been maintained at Sh0.5 per piece.

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