Economy

KRA raises tax on 31 goods despite firms’ freeze plea

Juices-1101

Kenya Revenue Authority (KRA) has increased tax on at least 31 goods including beer, fuel, bottled water and juice. FILE PHOTO | NMG

john-mutua-img

Summary

  • KRA increased excise duty on the products by 4.94 percent in line with the average inflation rate for the year to June, just days after the reopening of bars following a lengthy Covid-19 lockdown.
  • The taxman published the new excise taxes in the Kenya Gazette last Friday, paving the way for manufacturers to adjust prices of the various goods starting October 1.
  • Under the current law, the KRA Commissioner-General only needs to issue a legal notice stating the adjustment for the new tax to become effective.

Kenya Revenue Authority (KRA) has increased tax on at least 31 goods including beer, fuel, bottled water and juice, rejecting manufacturers petition to freeze the higher duty.

KRA increased excise duty on the products by 4.94 percent in line with the average inflation rate for the year to June, just days after the reopening of bars following a lengthy Covid-19 lockdown.

The taxman published the new excise taxes in the Kenya Gazette last Friday, paving the way for manufacturers to adjust prices of the various goods starting October 1.

Under the current law, the KRA Commissioner-General only needs to issue a legal notice stating the adjustment for the new tax to become effective.

The sector lobby, Kenya Association of Manufacturers (KAM), had urged the taxman to pause implementation of the annual inflation adjustment tax that affects excisable goods, citing economic hardships as a result of Covid-19 crisis.

Consumers will pay Sh6 more for a litre of beer and products with alcohol content not exceeding six percent while prices for spirits will rise highest at Sh12.50.

The review on the prices came three days after the State allowed bars and entertainment joints to reopen after a six-month shutdown in what is expected to spur beer and cigarette sales and shore up KRA’s collections from excise duty.

The adjustment is in line with the law that demands excise duty be revised upwards in tandem with the cost of living measure or the average rate of inflation in the previous financial year.

“The Commissioner-General adjusts for inflation the specific rates of duty set out in the Schedule hereto in accordance with the formula specified in Part 1 of the First Schedule to the Act with effect from the 1st October, 2020,” KRA said.

The taxman will now collect Sh265.50 per litre of spirit, Sh198.34 per litre of wine and Sh116.08 per litre of beer. A stick of cigarette will cost Sh0.16 more as the excise duty rose to Sh3.31 per stick from Sh3.15.

Super petrol rose by Sh1.03 as the inflation adjusted excise duty to Sh21.95 from Sh20.92. Kerosene and diesel prices increased by Sh0.54.