Firms, KRA fail to strike tax rise deal on 31 goods

A meeting between the Kenya Revenue Authority (KRA) and manufacturers over planned increases in taxes on more than 30 goods including fuel, bottled water, juice and beer from October failed to reach an agreement on Thursday.

KRA said it needs time and legal advice on a petition by the Kenya Association of Manufacturers (KAM), which seeks to freeze the automatic tax adjustment from October 1.

The manufacturing sector lobby last week urged the taxman to pause implementation of the annual inflation adjustment tax that affects excisable goods, citing economic hardships as a result of Covid-19 crisis.

“The meeting with KRA was inconclusive. They (KRA) have indicated that as implementers of the law, they have to review all the submissions made on this issue vis-à-vis what the law states,” said a KAM’s spokesperson after the meeting at Time Towers, chaired by KRA Deputy Commissioner for Policy and Tax Advisory Caxton Masudi.

“So once they do that they will inform us on next course of action.”

The taxman will increase the costs of the products by at least 5.43 percent, which will be a blow to consumers already hurt by job cuts and unpaid leaves in the wake of the Covid-19 pandemic.

KAM reckon it will hurt their sales and tax collections.

Under the current law, the KRA Commissioner-General only needs to issue a legal notice stating the adjustment for the new tax to become effective.

Inflation adjustment tax was introduced in 2018 and is seen as a means of protecting the government’s spending power from erosion by rising cost of living and avoid seeking MPs’ nod for higher retail prices.

Super petrol was expected to increase by Sh1.12 at the pump as dealers’ inflation adjusted excise duty rises to Sh22.05 a litre from the current Sh20.92. Kerosene and diesel prices were set to increase by Sh0.60 a litre.