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Tax increases a threat to our business in Kenya, says BAT

Some BAT brands. The company has reported a 21.2 per cent drop in net profit for the full year ended December 31, 2017. FILE PHOTO | NMG
Some BAT brands. The company has reported a 21.2 per cent drop in net profit for the full year ended December 31, 2017. FILE PHOTO | NMG  

Cigarette maker British American Tobacco Kenya #ticker:BAT has said further increases in excise duty could deal a hard blow on its profitability by putting its products out of consumers’ reach.

The Nairobi Securities Exchange-listed cigarette maker which on Friday reported a 21.2 per cent drop in net profit to Sh3.3 billion said “unpredictable” tax increases are a threat to its Kenya business.

“We would encourage the government to have a much more stable tax environment so that their revenues can be more predictable and we can have a more predictable operating environment,” BAT Kenya managing director Beverly Spencer-Obatoyinbo said at a media briefing.

“Smaller increases in specific excise rates are easier for us to manage and easier for the consumer to handle and will give consistent revenue gains for the government.”

Tobacco control advocates have been urging the government to raise tax on cigarettes from the current Sh2.50 per stick to Sh3.25; claiming it is still low. 

“Currently, the average growth in the nominal price of a pack of cigarettes is lower than that of kerosene and food, and therefore cigarette smoking is going up,” said Rodgers Kidiya, the programme officer in charge of research and development at the Nairobi-based International Institute for Legislative Affairs earlier while justifying the calls for increase.

The tax increase proposal, Mr Kidiya said, is based on a predictive model that takes into account inflation to show the future prices of products. 

The current tobacco excise tax regime was instituted in 2015, but in March last year Treasury secretary Henry Rotich gave low-end cigarette smokers a price relief with significant cut in excise tax that saw the price of non-filter sticks fall by 70 cents.

Mr Rotich split the tax structure for cigarettes keeping it at Sh2.5 per stick for cigarettes with filters and introducing a new rate of Sh1.8 for those without.

The two types of cigarettes had been attracting a uniform tax of Sh2.5 per stick.

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