Manufacturers have warned the proposed increase in the cost of excise stamps as much as three times will spike trade in counterfeited spirits, cosmetics, water brands and juices, hurting growth in taxes targeted by President William Ruto’s regime.
In a presentation to the Kenya Revenue Authority on Wednesday, the firms protested the proposed amendment to the laws as aimed at changing the use of excise stamps from a “revenue assurance tool” to a “revenue collection mechanism”.
The Kenya Association of Manufacturers, the sector’s lobby, charged that the resultant increase in the cost of compliance —which will make Kenya’s excise stamps amongst the highest in the world— will be passed onto consumers of bottled water, juices, cosmetics, beer as well as spirits like whisky and gin.
“We are afraid that such increment to some of the most counterfeited items in Kenya will further encourage counterfeit and illicit trade,” KAM chairman Rajan Shah said in a statement after meeting with KRA.
“This will deny government revenue and put lives of Kenyans at risk as substandard and highly dangerous goods infiltrate the market.”
The taxman first rolled out excise stamps on alcoholic drinks and cigarettes in 2013 before being affixed on bottled water, juices, soda in polyethene terephthalate (PET) bottles, energy drinks, cosmetics and food supplements in 2019.
The stamps, affixed under Electronic Goods Management System (EGMS) framework, are meant to deter counterfeiting and enable tracking of excisable goods along the supply chain, which helps the taxman compute the excise due from manufacturers and importers.
The hike, if realised, will be the first since 2017, increasing collection from the excise duty stream which has over the years become the softest target for additional government revenue.
The proposal to raise the stamp charges has come months after Dr Ruto, who took power last September, said he had intelligence rogue KRA staff were colluding with unscrupulous traders to print fake stamps and deny the exchequer billions of shillings annually.
The president said it was unacceptable that Kenya was selling a measly 2.9 billion excise stamps annually compared with Tanzania’s seven billion and Uganda’s nine billion despite the two economies being smaller than Kenya’s.
The excise stamps sold, he said, were less than a third of Kenya’s potential of 10 to 12 billion stamps.
The planned 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.
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 planned increment will add to a 6.3 percent adjustment for inflation last October and between a 10 and 20 percent raise in tax on excisable goods last July.
Excise duty, being a consumption tax, reaches a wider range of the population and is hard to avoid for a consumer, providing the government with an attractive target in its bid to raise additional taxes.
