A Member of Parliament affiliated to Deputy President William Ruto’s Kenya Kwanza coalition on Thursday evening proposed higher taxation on beer and a new duty on imported SIM cards in changes to the Finance Bill 2022 that were being debated last evening.
Kikuyu MP Kimani Ichung’wah sought to increase excise duty on beer, wine and spirits by between 20.2 percent and 25.6 percent, opposing the recommendation by the National Assembly Finance Committee, which reversed the Treasury’s proposals to raise alcohol taxes.
In a raft of amendments largely seen to have the blessings of the Ruto-led Kenya Kwanza coalition, Mr Ichung’wah also proposed a new Sh50 excise duty on every imported ready-to-use SIM card.
The proposals, if adopted, will see the tax on a litre of beer rise 23.1 percent to Sh150 from the current Sh121, which will increase the price of a bottle of beer by Sh15.
Mobile phone users seeking to replace or register afresh will pay more for the product, with the mobile telephony market a key target for raising billions of shillings in taxes. Presently, Safaricom charges Sh50 for replacement and fresh SIM listing.
The amendments by Mr Ichung’wah contradicted the recommendation by the Finance and Planning Committee, chaired by Gladys Wanga (Homa Bay), that the current taxes on alcohol be retained in the financial year starting July.
“Treasury [officials] were given the proposals and they did not oppose,” said Mvita MP Abdulswamad Nassir, who is the chairman of the National Assembly Public Investments Committee (PIC).
The higher duties proposed by Mr Ichung’wah come weeks after the MP said the Kenya Kwanza Alliance would shoot down the Finance Bill, 2022, arguing that additional taxes will burden households.
Mr Ichung’wah is an ardent supporter of Dr Ruto, who has fallen out with President Uhuru Kenyatta, a stance that saw the Kikuyu lawmaker dropped as chair of the Budget Committee in 2020.
Dr Ruto is battling for the presidency against veteran opposition leader Raila Odinga, who this time has the support of his former political foe, President Kenyatta.
Mr Ichung’wah’s alcohol taxes are higher than the duties proposed by Treasury Cabinet Secretary Ukur Yatani.
The Treasury had proposed to raise excise duty on beer to Sh134 per litre, Sh229 for wine and Sh335.30 for spirits.
Lawmakers were yet to make a decision on the new taxes by the time this paper went to press.
The Wanga-led committee had rejected Mr Yatani’s proposal on grounds that higher taxes on alcohol will push prices beyond the affordable levels and could result in increased uptake of illicit brews.
“Increase in excise duty on beer may increase uptake of illicit brew. Additionally, the excise rate…had been revised in the Finance Act 2021, and should therefore be given some time before review,” the committee on Finance on May 24.
The committee’s recommendation was largely seen as aimed at not upsetting voters ahead of the August polls.
Sin taxes on cigarettes and alcohol have traditionally been the target of finance ministers for additional revenue, but in recent years the pool has been widened to include widely used items such as bottled water, cosmetics, confectionery, motorcycles and petroleum products.
And in a further blow to the Treasury’s plan to generate additional Sh50.4 billion revenue in new taxation measures for the government which will take power after August polls, the Finance committee had also wanted increased taxation on betting, gaming, prize competition and lottery dropped.
Gamblers will pay 15 percent of the cash they have set aside in their wallets for betting if lawmakers approve Mr Ichung’wah’s proposals.
Currently, they pay 7.5 percent on cash wagered on betting, but the Treasury in the Finance Bill was seeking to increase the tax to 20 percent.
Yesterday’s amendments further sought to introduce a 25 percent excise duty on earnings by media houses on betting and alcohol advertisement, a higher rate than 15 percent proposed in the Bill and which the Wanga committee rejected.
“Excise duty on fees charged on advertisement by television stations, print media, billboards, FM radio stations and digital media on alcoholic beverages, betting and gaming, lottery and prize competitions shall be at the rate of 25 percent,” Mr Ichung’wah proposed.
The MP, however, agreed with the committee that the Kenya Revenue Authority adjust excise duty in line with inflation after every two years as opposed to current annual changes.
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The inflation adjustment after every two years had also been backed by East African Breweries and Coca-Cola, among other organisations and business lobbies in a bid to enhance certainty and predictability in taxation regime.
Since last year, there have been rallying calls from consumers and manufacturers for a change in the legal regime for inflation adjustment to consider unique economic circumstances before raising the duties, which eventually reflects in final prices.
Higher taxation on alcohol will upset brewers like EABL and Keroche as well as distributors who have warned it will push the cost of the beverages to unaffordable levels for some consumers.
“The tax changes will be a disaster. Ten percent (rise in excise duty) is too much. It will make beer and spirits very expensive. It will affect the whole ecosystem from farmers, bar owners and distributors. It will not be good for anybody,” EABL managing director Jane Karuku said on April 26.
“There are so many things that are going wrong from an inflation perspective: Oil prices are going to affect us, the Ukraine-Russia crisis, and now we are hit with excise just when we are trying to survive Covid. What do we do?”