The Kenya Revenue Authority is confident it will meet its annual revenue targets from sin taxes despite the lawmakers shooting down some of its major proposals.
The National Assembly declined to allow new excise duty on ice cream and increased taxation of betting, powdered beer, motorcycle taxis (boda bodas), bottled water and fee earned by media houses from the advertisement of alcoholic drinks and betting.
This was seen as a major blow to the taxman, which has over the years turned to excisable goods and services as a soft target for raising new revenue.
The KRA, however, says the projected revenue loss will be compensated by new duty the MPs introduced on other excisable goods like 10 percent tax on mobile phones and Sh50 on ready-to-use SIM card imports.
“When Parliament make a decision [to drop a tax proposal] they also have to strike a balance. From our analysis, we find that they balance it off,” Maurice Oray, KRA Deputy Commissioner for corporate policy, said in an interview.
“So we cannot say we are going to lose in terms of collections because of dropping proposal to increase duty on things like betting. For example, they introduced excise duty on mobile cellular phones, SIM cards just to mention a few.”
The taxman initially targets to raise Sh297.20 billion from excise duty for the financial year ending June 2023 as set by the Treasury. This will be a Sh45.11 billion, or 17.89 percent, growth over Sh252.09 billion excise duty receipts for the year ended last June.
Some of the proposals shot down include nearly tripling excise duty on betting, gaming, prize competition and lottery to 20 percent from 7.5 percent and raising duty on imported passenger motorcycles by Sh1,218.48 per unit from Sh12,185.16.
The MPs also rejected a plan to increase duty on powdered beer by Sh12.15 per litre from 121.85 and by Sh0.57 per litre of water from Sh6.03 as well as a 15 percent tax on ice cream.
Governments are increasingly expanding the basket of products they charge excise duty unlike in the past when it largely applied on goods and services considered harmful to the health of the society or morally suspect hence the term ‘sin tax’.
“Traditionally, excise was confined to those goods which have negative externalities,”