Economy

Treasury eyes Sh6bn in fuel, juice, beer tax rise

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Treasury Secretary Ukur Yatani. FILE PHOTO | NMG

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Summary

  • The Treasury is looking to raise Sh6 billion from higher taxes imposed on a wide range of goods, including fuel, bottled water, juice and beer in October.
  • The adjustment is in line with the law that demands that excise duty be revised upwards in tandem with the cost of living measure or the average rate of inflation in the 12 months through June.

The Treasury is looking to raise Sh6 billion from higher taxes imposed on a wide range of goods, including fuel, bottled water, juice and beer in October.

Treasury secretary Ukur Yatani wrote in a letter to the International Monetary Fund (IMF) that “inflation adjustments to excise taxes introduced in October 2020… (have) an estimated revenue yield of Sh6 billion in FY2020/21”.

The adjustment is in line with the law that demands that excise duty be revised upwards in tandem with the cost of living measure or the average rate of inflation in the 12 months through June. It affected at least 31 goods.

The Kenya Revenue Authority (KRA) adjusted upwards the excise duty by 4.94 per cent last October in line with the average inflation rate for the prior year ended June 2020 despite protests by the manufacturers and traders.

The taxman uses the annual inflation adjustment tax that affects excisable goods, which also include motorcycles (boda boda), as a revenue enhancement tool in a country where less than half of eligible taxpayers are compliant, leaving those in tax net to shoulder most of the burden.

Bars and entertainment joints were the main premises where beers and cigarettes — the major drivers of excise duty receipts — are consumed in the pre-Covid period.

The KRA had published the fresh excise duty rates days after public health authorities allowed bars and entertainment joints to reopen under shorter operating hours following a six-month shutdown to stem the spread of the Coronavirus infections from April 2020.