KRA to net Sh5.2 billion from inflation taxes

Kenya Revenue Authority (KRA) Commissioner-General Githii Mburu. PHOTO | JEFF ANGOTE | NMG 

The taxman projects to collect an extra Sh5.2 billion from the inflation adjustment on excisable goods for the 2021/22 year, underlying the double blow consumers face from a rise in the cost of living.

This was revealed in a memorandum by the Kenya Revenue Authority (KRA) asking Parliament to approve Legal Notice No. 176 and 177 of 2022, which effected the excise duty adjustment that took effect on October 1.

The legal notice provides for an increase of 6.3 percent on the specific rates of excise duty on excisable goods including beer, cigarettes, fruit juice and bottled water.

The adjustment, however, excludes petroleum products, liquid nicotine for electronic cigarettes and imported ready-to-use SIM cards.

“The expected revenue from the inflation adjustment is Sh5.2 billion from goods whose excise duty rates were adjusted for inflation,” Githii Mburu, the KRA commissioner general said in a memorandum to MPs.

The adjustment is in line with the law that demands that excise duty on goods be revised upwards in tandem with the cost of living measure or the average rate of inflation in the 12 months through June.

This is the first time that the taxman is seeking parliamentary approval to effect the new rates following changes to the law that came into effect last year.

Mr Mburu said the inflation adjustment will positively impact government activities by enhancing financial capacity to provide public services, and reduce reliance on loans.

“It will also result in nominal increase in prices, better services and improved infrastructure and business environment,” Mr Mburu said.

“The cost in terms of reduced consumption is expected to be low since the products are inelastic to price.”

Mr Mburu made inflation adjustments to about 30 different sets of excisable goods.

Fruit juices and vegetable juices excise duty was raised to Sh14.14 from Sh13.30 per litre while bottled water was increased from Sh6.03 per litre to Sh6.41 per litre.

The excise duty on beer was increased from Sh134 per litre to Sh142.44 while wines rose from Sh229 to Sh243.43 per litre.

The KRA also adjusted excise duty on spirits from Sh335.30 to Sh356.42 per litre while filter cigarettes went up to Sh4067.03 per litre from Sh3,825.99.

Mr Mburu also submitted to Parliament Legal Notice No 177 that adjusts the specific rates of export levy to take into account inflation in line with the requirements of the Miscellaneous Fees and Levies Act, 2016.

He is required under section 5(4) of the Miscellaneous Fees and Levies Act, 2016 to adjust the export levy of products with specific rates. This is done annually, taking into account the rate of inflation,

“The primary objective of the legal notice is to provide a legal instrument to enable the government implement tax measures necessary for funding its economic development and growth agenda,” he said.

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